Important
The board of directors (the “Board”), the supervisory committee (the “Supervisory Committee”) and the directors (the “Directors”),
supervisors (the “Supervisors”) and senior management (the “Senior Management”) of Shandong Chenming Paper Holdings
Limited (the “Company”, “us”, and “we”) hereby warrant that there are no false representations, misleading statements or material
omissions contained in this report (the “Report”), and jointly and severally accept full responsibility for the truthfulness, accuracy
and completeness of its contents. This Report has been prepared in both Chinese and English. For any discrepancies, the Chinese
version shall prevail.
Chen Hongguo, the chairman of the Company, Wang Chunfang, the financial controller of the Company and Guo Xingping, the
head of the financial department, declare that they guarantee the truthfulness and completeness of the financial statements for the six
months ended 30 June 2009.
This interim report was considered and approved by the fifteenth meeting of the fifth session of the Board of the Company with all
directors present.
The interim financial statements for the six months ended 30 June 2009 of the Company and its subsidiaries (collectively referred to
as the “Group”) prepared in accordance with Accounting Standards for Business Enterprises issued by the Ministry of Finance of
the PRC and International Financial Reporting Standards have not been audited.2
Contents
I. Company Information 3
II. Summary of Financial and Operating Results 4
III. Changes in Share Capital and Shareholders 7
IV. Directors, Supervisors and Senior Management 11
V. Directors’ Report 12
VI. Material Matters 25
VII. Unaudited Financial Statements and Notes thereto
Prepared in Accordance with Accounting
Standards for Business Enterprises 35
VIII. Documents Available for Inspection 1613
I. Company Information
1. Legal Chinese name of the Company: 山東晨鳴紙業集團股份有限公司
Legal English name of the Company: SHANDONG CHENMING PAPER HOLDINGS LIMITED
Abbreviation of the English name: SCPH
2. Legal Representative of the Company: Chen Hongguo
3. Secretary to the Board of the Company: Hao Yun
Company Secretary (Hong Kong): Poon Shiu Cheong
Securities Affairs Representatives: Fan Yingjie, Sun Wenke
Correspondence Address: No. 595 Shengcheng Road, Shouguang City,
Shandong Province, People’s Republic of China
Telephone: (86)-0536-2158011, (86)-0536-2156488
Facsimile: (86)-0536-2158640
Email address: chenmmingpaper@163.com
4. Registered Address and Office No. 595 Shengcheng Road, Shouguang City,
Address of the Company: Shandong Province, People’s Republic of China
Postal Code: 262700
International Website of the Company: http://www.chenmingpaper.com
5. Designated Local Newspapers for China Securities Journal and Hong Kong
Information Disclosure: Commercial Daily
Designated Website for http://www.cninfo.com.cn
Publication of Interim Report: http://www.hkex.com.hk
Places for Inspection of
the Company’s Interim Report: Capital operation department of the Company
6. Stock Information: A shares
Shenzhen Stock Exchange
Stock Abbreviation: 晨鳴紙業
Stock Code: 000488
B shares
Shenzhen Stock Exchange
Stock Abbreviation: 晨鳴B
Stock Code: 200488
H shares
The Stock Exchange of Hong Kong Limited
Stock Abbreviation: Chenming Paper
Stock Code: 1812
7. Other Relevant Information:
Date of Change in Registration of
the Company: 27 September 2008
Registered Address: No. 595 Shengcheng Road, Shouguang City,
Shandong Province
Legal Person Business License
Registration Number: 370000400001170
Taxation Registration Number: 3707836135889864
II. Summary of Financial and Operating Results
I. MAJOR FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH
ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES
Unit: RMB’000
Increase / decrease
as at end of
reporting period
compared
with the end
End of the current End of period of period of
Items reporting period of last year last year (%)
Total assets 28,421,647 26,299,496 8.07%
Equity attributable to equity
holders of the Company 12,313,454 12,259,079 0.44%
Net assets per share (RMB) 5.9715 5.9451 0.44%
Increase/decrease
for the
reporting period
The compared with
The current corresponding corresponding
reporting period period of period of
(January to June) last year last year (%)
Operating profit 175,177 1,185,780 -85.23%
Total profit 238,240 1,346,656 -82.31%
Net profit attributable to
equity holders of the Company 157,487 947,427 -83.38%
Net profits after extraordinary gains
or losses attributable to the
equity holders of the Company 112,231 823,335 -86.37%
Basic earnings per share (RMB) 0.076 0.55 -86.18%
Diluted earnings per share (RMB) N/A N/A N/A
Return on net assets 1.28% 7.81% decreased
by 6.53
percentage points
Net cash flows from operating activities -526,102 1,710,556 -130.76%
Net cash flows per share from operating activities (RMB) -0.26 0.83 -131.33%5
I. MAJOR FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH
ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES (continued)
2. EXTRAORDINARY GAINS OR LOSSES ITEMS
Unit: RMB’000
Extraordinary gains or losses items Amount
Net gains or losses from
disposal of non-current assets 5,792
Government grants received 35,377
Net gains or losses attributable to debt restructuring 248
Gains or losses arising from acquisition of subsidiaries 3,026
Gains or losses arising from financial instruments held for trading 6,993
Non-operating net gains or
losses other than the above 11,022
Effect of extraordinary gains or
losses on minority shareholders -6,313
Effect of extraordinary gains or losses on income tax -10,889
Total 45,2566
III. RECONCILIATIONS OF ACCOUNTS PREPARED IN ACCORDANCE WITH
ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES AND INTERNATIONAL
FINANCIAL ACCOUNTING STANDARDS
Unit: RMB’000
Accounting International
Standards Financial
For Business Accounting
Items Enterprises Standards
Net profit 186,115 203,846
Net assets 14,091,287 13,744,212
Reason for difference In the years prior to 2006, the Group accounted for special fund for treasury bond received in
connection with construction of fixed assets and special accounts payable into capital reserves
under the Accounting Standards for Business Enterprises. However, the Group accounted for such
special fund for treasury bond received and special accounts payable into deferred gains under
International Financial Accounting Standard, and such deferred gains were amortized in
installments over the useful lives of the fixed assets.7
III. Changes in Share Capital and Shareholders
I. CHANGES IN SHARE CAPITAL AT THE END OF THE REPORTING PERIOD
(Unit: shares)
Increase/decrease (+/-) resulting
Opening balance from changes in the reporting period Closing balance
Increase in Release of
Number lock-up restricted Number
of shares Percentage shares Shares Sub-total of shares Percentage
I. Restricted shares 303,987,126 14.74% 335,192 -186,820 148,372 304,135,498 14.75%
1. State-owned legal
person shares 293,003,657 14.21% — — — 293,003,657 14.21%
2. Shares held by Senior
Management 10,983,469 0.53% 335,192 -186,820 148,372 11,131,841 0.54%
II. Non-restricted shares 1,758,058,815 85.26% -335,192 186,820 -148,372 1,757,910,443 85.25%
1. Renminbi ordinary shares 809,291,330 39.25% -335,192 186,820 -148,372 809,142,958 39.24%
2. Domestic listed
foreign shares 557,497,485 27.04% — — — 557,497,485 27.04%
3. Overseas listed
foreign shares 391,270,000 18.97% — — — 391,270,000 18.97%
III. Total number of shares 2,062,045,941 100.00% — — — 2,062,045,941 100.00%
Note: During the reporting period, the restricted shares held by Senior Management changed by 148,372 shares from 10,983,469 shares to
11,131,841 shares. The reasons for such change were as follows:
(1) According to “the Practice Guidance for the Company’s shares held by the directors, supervisors and senior management
of the listed companies of Shenzhen Stock Exchange” (《深圳證券交易上市公司董事、監事和高級管理人員所持本
公司股份管理業務操作指南》), the shares held by the existing Directors, Supervisors and Senior Management would be
released from lock-up based on 25% of the shares held at the beginning of each year. For the 1,726 shares held by Senior
Management, the nature of the shareholdings would be changed from “restricted shares held by Senior Management” to
“non-restricted RMB ordinary shares (A share)”.8
I. CHANGES IN SHARE CAPITAL AT THE END OF THE REPORTING PERIOD (continued)
(2) During the reporting period, the half year lock-up period for the resigned Senior Management of the Company had
expired. The nature of shareholding of the 185,094 shares held by Senior Management was changed from “restricted
shares held by Senior Management” to “non-restricted RMB ordinary shares (A share)”. The half year lock-up period for
shares held by two resigned Directors had not yet expired, the shares held by them remained restricted, as a result,
“restricted shares held by Senior Management” increased by 195,917 shares compared with the beginning of the year; for
the 139,275 shares held by the newly appointed Directors of the Company, the nature of the shareholding had changed
from “non-restricted RMB ordinary shares (A share)” to “restricted shares held by Senior Management” .
II. SHAREHOLDERS’ PROFILE AS AT THE END OF THE REPORTING PERIOD
1. The top ten shareholders and the top ten shareholders of non-restricted shares
Total number of shareholders The total number of shareholders was 151,287, of which 117,663 were holders of A
shares, 32,852 were holders of B shares and 772 were holders of H shares.
Shareholdings of the top ten shareholders
Total Number of Number of
number of restricted shares
Name of Type of Percentage of shares held shares held pledged or
shareholders shareholder shareholding (shares) (shares) locked-up
HKSCC Nominees Limited Overseas 18.90% 389,807,000 0 unknown
non-state-owned
legal person
(foreign shareholder)
Shouguang Chenming Holdings State-owned 14.21% 293,003,657 293,003,657 0
Company Limited legal person
KEYWISE GREATER CHINA Overseas 1.15% 23,727,609 0 unknown
OPPORTUNITIES MASTER FUND legal person
China Construction Bank Domestic 1.07% 22,031,583 0 unknown
－鵬華價值優勢股票型 non-state-owned
證券投資基金 legal person
Industrial and Commercial Domestic 1.06% 21,765,106 0 unknown
Bank of China non-state-owned
－諾安股票證券股資基金 legal person
China Construction Bank Domestic 0.98% 20,294,918 0 unknown
－工銀瑞信精選平衡混合型 non-state-owned
證券投資基金 legal person9
III. SHAREHOLDERS’ PROFILE AS AT THE END OF THE REPORTING PERIOD (continued)
1. The top ten shareholders and the top ten shareholders of non-restricted shares (continued)
Total Number of Number of
number of restricted shares
Name of Type of Percentage of shares held shares held pledged or
shareholders shareholder shareholding (shares) (shares) locked-up
Agricultural Bank of China Domestic 0.98% 20,151,844 0 unknown
－富蘭克林國海彈性市值 non-state-owned
股票型證券投資基金 legal person
China Construction Bank Domestic 0.89% 18,452,709 0 unknown
－華寶興業行業精選股票型¨ non-state-owned
證券投資基金 legal person
PLATINUM ASIA FUND Overseas 0.79% 16,234,459 0 unknown
legal person
China Pacific Insurance Company Domestic 0.77% 15,828,994 0 unknown
Limited - Bonus - Individual Bonus legal person
Shareholding of the top ten shareholders of non-restricted shares
Name of Classes
Number of non-restricted shares held
shareholders (shares) of shares
HKSCC Nominees Limited 389,807,000 H Shares
KEYWISE GREATER CHINA OPPORTUNITIES MASTER FUND 23,727,609 B Shares
China Construction Bank
－鵬華價值優勢股票型證券投資基金 22,031,583 A Shares
Industrial and Commercial Bank of China
－諾安股票證券投資基金 21,765,106 A Shares
China Construction Bank
－工銀瑞信精選平衡
混合型證券投資基金 20,294,918 A Shares
Agricultural Bank of China
－富蘭克林國海彈性市值
股票型證券投資基金 20,151,844 A Shares
China Construction Bank
－華寶興業行業精選股票型證券投資基金 18,452,709 A Shares
PLATINUM ASIA FUND 16,234,459 B Shares
China Pacific Insurance Company Limited
- Bonus - Individual Bonus 15,828,994 A Shares
KEYWISE GREATER CHINA MASTER FUND 15,666,099 B Shares10
III. SHAREHOLDERS’ PROFILE AS AT THE END OF THE REPORTING PERIOD (continued)
1. The top ten shareholders and the top ten shareholders of non-restricted shares (continued)
Connected relationship or Among the top ten shareholders of the Company, Shouguang Chenming
concert-party relationship Holdings Company Limited, a state-owned legal person shareholder,
among the above is not connected with any of the other shareholders. Nor is it a
shareholders party acting in concert with any of them as defined in Administrative
Measures for Information Disclosure of the Changes in Shareholdings of
Listed Companies (《上市公司持股變動信息披露管理辦法》) KEYWISE
GREATER CHINA MASTER FUND and KEYWISE GREATER CHINA
OPPORTUNITIES MASTER FUND are both under KEYWISE Capital. Save
for the above, the Company is not aware of any other shareholders of
outstanding shares as aforesaid are connected with other or whether any of
these shareholders falls within the meaning of parties acting in concert as
defined in Administrative Measures for Information Disclosure of Changes in
Shareholdings of Listed Companies (《上市公司持股變動信息披露管理辦
法》).
2. Changes in the Company’s controlling shareholders and beneficial controllers during the reporting
period
The Company’s controlling shareholders and beneficial controllers remained unchanged during the reporting period.11
IV. Directors, Supervisors and Senior Management
I. CHANGES IN SHAREHOLDINGS OF THE DIRECTORS, SUPERVISORS AND SENIOR
MANAGEMENT
During the reporting period, the shareholdings of the Directors, Supervisors and Senior Management of the Company remain
unchanged.
II. CHANGES IN DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
1. On 8 April 2009, upon the approval of the 12th meeting of the fifth session of the Board, Mr. Xia Guangchun resigned
from the position of deputy general manager of the Company, Mr. Liu Junwu resigned from the position of financial
controller of the Company for work-related reasons and Mr. Wang Chunfang was appointed as the Company’s financial
controller for a term until the end of the current session of the Board.
On 8 April 2009, Mr. Wu Bingyu and Mr. Xing Fangtong, both Directors of the Company, resigned from their positions
as Directors of the Company.
On 8 April 2009, Mr. Liu Wenzheng, a Supervisor of the Company, resigned from his position as Supervisor of the
Company. At the 2nd meeting of the seventh session of staff representatives of the Company, Ms. Yang Hongqin was
nominated to be the Supervisor elected by staff representatives of the Company and Mr. Zhao Shujun would cease to be a
Supervisor of the Company as representative of the staff.
For specific details, please refer to the relevant announcements dated 9 April 2009 published on China Securities Journal,
Hong Kong Commercial Daily and the website of CHINF (www.cninfo.com.cn) and the relevant announcements dated 8
April 2009 published on the website of the Stock Exchange of Hong Kong Limited (“Hong Kong Stock Exchange”)
(www.hkex.com.hk).
2. On 26 May 2009, upon the approval of the 2008 Annual General Meeting of the Company, Mr. Geng Guanglin and Mr.
Tan Daocheng were elected Executive Directors of the Company for a term until the end of the current session of the
Board; Mr. Guo Guangyao and Mr. Wang Xiaoqun were elected external Supervisors of the Company for a term until the
end of the current session of the Supervisory Committee.
For specific details, please refer to the relevant announcements dated 27 May 2009 published on China Securities Journal,
Hong Kong Commercial Daily and the website of CHINF (www.cninfo.com.cn) and the relevant announcements dated
26 May 2009 published on the website of Hong Kong Stock Exchange (www.hkex.com.hk).12
V. Directors’ Report
I. Discussion and analysis under Accounting Standards for Business Enterprises:
The following financial data are extracted from the unaudited financial statements prepared by the Company in accordance
with Accounting Standards for Business Enterprises. The following discussion and analysis shall be read in conjunction with
the financial statements of the Company set out in this report and the notes thereto.
1. Operations of the Company during the reporting period
Affected by the global financial crisis in last year, the papermaking industry experienced an unprecedented challenge in
the first half of 2009, especially in the first quarter, when demand for paper products shrank and a significant drop in price
of paper products both led to decrease in profitability of the principal businesses of the Company during the reporting
period, on the basis of period-on-period comparison. However, as the macro-economic environment of China gradually
turned for the better, the papermaking industry regained momentum in the second quarter with a rebound in the price of
most paper products, while sales volume also turned higher. In line with the prediction by the Board of the Company in
the 2008 Annual Report, the papermaking industry began to stabilise after experiencing the trough in the second half year
of 2008; and since the price of upstream raw materials will remain at low levels for a certain period, the price for paper
products will be able to provide a reasonable break-even point in terms of profitability. While the industry was
undergoing gradual improvement from the bottom of the trough, the leadership of our Board guided the Company
through the orderly commencement of various tasks in accordance with the development plan formulated at the beginning
of the year, during which the problems related to production and operation had been overcome and we had ultimately
realised continued improvement in a number of operation indicators.
During the reporting period, the Company realised production of 1,451,600 tonnes of machine-made paper with sales of
1,519,300 tonnes, representing decreases of 8.43% and 0.16%, respectively, compared with the corresponding period of
last year, while realised revenue from operations decreased by RMB1,877 million, or 21.95% compared with the
corresponding period of last year, and operating profit decreased by RMB1,011 million, or 85.23% compared with the
corresponding period of last year. Net profit attributable to the equity holders of the Company decreased by RMB790
million, or 83.38% compared with the corresponding period of last year.13
FINANCIAL RESULTS (continued)
I. Discussion and analysis under Accounting Standards for Business Enterprises: (continued)
1. Operations of the Company during the reporting period (continued)
Unit: RMB’000
Increase
compared
with the
corresponding
January to January to period of
Item June 2009 June 2008 last year (%)
Revenue from operations 6,675,367 8,552,402 -21.95
Operating profit 175,177 1,185,780 -85.23
Net profit attributable to equity holders of
the Company 157,487 947,427 -83.38
The Company is engaged in the light industry of papermaking. Our principal operations are the production and sales of
machine-made paper, paperboard, papermaking raw materials, papermaking machinery, electricity and steam. Among
them, sales revenue from machine-made paper provided revenue from principal operations amounting to RMB6,373
million, accounting for 95.48% of the total revenue from principal operations of the Company during the reporting
period.14
FINANCIAL RESULTS (continued)
I. Discussion and analysis under Accounting Standards for Business Enterprises: (continued)
2. Revenue from operations by industry and product
Unit: RMB’000
Revenue from operations by industry
(reversal of provision for impairment of inventories included in costs)
Increase/
Increase/ decrease in
decrease in Increase/ gross profit
revenue from decrease in margins
Gross profit operations cost of sale compared
Cost of sale margins compared compared with the
(reversal of (reversal of with the with the corresponding
provision for provision for corresponding corresponding period of
Revenue impairment of impairment of period of period of last year
from inventories inventories last year last year (percentage
operations included) included) (%) (%) points)
Sales of machine-made paper 6,373,366 5,414,320 15.05 -20.48 -12.78 -7.50
Sales of electricity and steam 108,740 74,243 31.72 -13.66 -32.62 19.21
Sales of construction materials 143,530 117,342 18.25 -54.55 -57.11 4.87
Sales of chemical products 3,709 1,858 49.91 -92.66 -90.91 -9.64
Others 46,022 21,492 53.30 1.05 -39.53 31.33
Total 6,675,367 5,629,255 15.67 -21.95 -15.31 -6.61
Principal activities by product (reversal of provision for
impairment of inventories included in costs)
Light weight coated paper 791,562 680,507 14.03 -14.20 -8.08 -5.72
Duplex press paper 960,721 801,725 16.55 -20.41 -12.51 -7.54
Writing paper 170,100 146,575 13.83 -15.26 -5.82 -8.64
Copperplate paper 1,302,564 1,097,450 15.75 -14.37 0.81 -12.69
News press paper 882,059 746,062 15.42 -20.62 -16.51 -4.16
Paperboard 259,616 228,517 11.98 -46.01 -46.86 1.40
White paper board 912,095 802,642 12.00 -26.57 -11.53 -14.9715
FINANCIAL RESULTS (continued)
I. Discussion and analysis under Accounting Standards for Business Enterprises: (continued)
2. Revenue from operations by industry and product (continued)
Unit: RMB’000
Revenue from operations by industry (reversal of provision for
impairment of inventories included in costs)
Increase/
decrease in
Increase/ gross profit
decrease Increase/ margins
in revenue from decrease compared
operations in cost of with the
compared sales compared corresponding
with the with the period of
corresponding corresponding last year
Revenue from Gross profit period of period of (percentage
operations Cost of sales margins (%) last year (%) last year (%) points)
Sales of machine-made paper 6,373,366 5,517,212 13.43 -20.48 -11.12 -9.12
Sales of electricity and steam 108,740 74,243 31.72 -13.66 -32.62 19.21
Sales of construction materials 143,530 117,342 18.25 -54.55 -57.11 4.87
Sales of chemical products 3,709 1,858 49.91 -92.66 -90.91 -9.64
Others 46,022 21,492 53.30 1.05 -39.53 31.33
Total 6,675,367 5,732,147 14.13 -21.95 -13.77 -8.15
Principal activities by product (reversal of provision for
impairment of inventories included in costs)
Light weight coated paper 791,562 687,231 13.18 -14.20 -7.17 -6.57
Duplex press paper 960,721 815,810 15.08 -20.41 -10.97 -9.01
Writing paper 170,100 147,241 13.44 -15.26 -5.39 -9.03
Copperplate paper 1,302,564 1,112,709 14.58 -14.37 2.21 -13.86
News press paper 882,059 755,901 14.30 -20.62 -15.40 -5.28
Paperboard 259,616 244,178 5.95 -46.01 -43.22 -4.63
White paper board 912,095 824,453 9.61 -26.57 -9.12 -17.3616
FINANCIAL RESULTS (continued)
I. Discussion and analysis under Accounting Standards for Business Enterprises: (continued)
3. Breakdown of revenue from operations by geographical segment
Unit: RMB’000
Increase/
decrease
in revenue from
operations
compared
with the
corresponding
Revenue from period of
Geographical segment operations last year (%)
PRC 5,950,962 -21.82
United States 53,841 146.09
Hong Kong 71,282 -57.22
Japan 183,108 182.16
South Africa 38,699 -74.49
Other overseas areas 377,475 -29.51
Total 6,675,367 -21.9517
FINANCIAL RESULTS (continued)
I. Discussion and analysis under Accounting Standards for Business Enterprises: (continued)
4. Problems emerged in operations and measures to resolve them
Under the repercussions of the global financial crisis, during the reporting period, the paper products produced by the
Company were adversely affected by the decrease in price and severe demand shrinkage. Thus, the management of the
Company seized the initiative to set out new requirements and measures in respect of the sales, including:
(1) Placing sales efforts as the single most important work of the Company, employing leading management figures of
the Company to reinforce communications and exchange of ideas with major customers;
(2) Strengthening the improvement, examination and supervision of the fundamental management of the sales system,
including risk management, delivery management and contract management, etc.; meanwhile, monitoring on
foreign investment, joint investment, private investment and individuals’ investment were strengthened, requiring
pledge or guarantee from such types of customers;
(3) Establishing the monthly business outlook and implementing the corresponding sales and marketing strategies
timely in response to market changes;
(4) Enhancing the collection and survey and studies of the market information; based on the timely collection of market
information, actively adjusting product structure by promoting and developing new products;
(5) Reinforcing personnel training and building of sales teams, establishing a comprehensive appraisal system for sales
personnel to adequately bring out the proactive work attitude of business personnel.
The Company weathered a difficult time through implementing a series of proven measures. The inventories of finished
products dropped sharply when compared with the end of last year. The Company currently operates in a relatively better
environment with a period-on-period hike in its product prices and gross margin.
Meanwhile, the international and domestic price of paper making raw materials was in its historical low level, particularly
the price of wood pulp in the international market. The Company took full advantage of its purchasing edge by making
strategic purchase of wood pulp reserve during the reporting period to effectively lower its product cost in the future.18
II. Investments during the reporting period
1. Use of proceeds during the reporting period
The Company issued 355.7 million H shares on 18 June 2008 with the issue price of HK$ 9. The total proceeds from the
issue were translated into RMB 2,831 million. The net proceeds less the expenses of RMB 103 million were RMB 2,728
million. As of the end of the reporting period, the proceeds of RMB 970 million were utilised as working capital and the
remaining proceeds were deposited at special deposit bank accounts. The status of the projects relating to the proceeds
during the reporting period is as follows:
Unit: RMB in ten thousands
Use of total proceeds 22,648
Total proceeds 272,825 during the reporting period
Accumulated use of total proceeds 97,213
Whether
Whether progressing
Proposed Project Actual Benefits progressing with estimated
Project undertaken investment changes investment realised as scheduled benefits
Zhanjiang 700,000-tonne per
annum pulp project 248,271 No 72,703 — — Net yet in
production
Supplement to working capital 24,554 No 24,510 — — —
Total 272,825 — 97,213 — — —
Explanation on failure to progress as
scheduled and realise benefits
(by specific projects) Nil
Explanation on reason of change and
change procedure (by specific projects) Nil
Use of unused proceeds The unused remaining proceeds
and their status were deposited at special deposit bank accounts.
Note: The equipment purchase contract of Zhanjiang Pulp Project was entered into with Andritz on 6 July 2009, and a memorandum
was entered into with Metso in relation to the termination of the equipment purchase contract of Zhanjiang Pulp Project on 20
August 2008, pursuant to which both parties bore no liabilities to the other party. Details of such matter were issued in the
relevant announcements published on China Securities Journal and Hong Kong Commercial Daily on 7 July 2009 and on the
website of Hong Kong Stock Exchange (www.hkex.com.hk) on 6 July 2009.
As of the date hereof, the prepayments for the equipment purchase of Zhanjiang Pulp Project had been paid, the vendor
would commence delivery of products after January 2010 in various batches.19
II. Investments during the reporting period (continued)
2. Description of other material investments
(1) Pursuant to the 2008 Annual General Meeting of the Company held on 26 May 2009, a resolution on the
construction of high-end culture paper project by Zhanjiang Chenming was passed. The aggregate investment for
this project will be RMB1.668 billion, which will be funded by internal resources of the Company and bank loans.
On 6 July 2009, the Company entered into a project equipment purchase contract with aggregate consideration of
approximately RMB1.327 billion. Details of such matter were issued in the relevant announcements published on
China Securities Journal, Hong Kong Commercial Daily and the website of CHINF on 29 April 2009, 27 May 2009
and 7 July 2009, and on the website of Hong Kong Stock Exchange (www.hkex.com.hk) on 28 April 2009, 26 May
2009 and 6 July 2009.
(2) Pursuant to the 2009 first extraordinary general meeting of the Company held on 27 July 2009, a resolution on the
construction of a high-end low weight coated paper project and construction of the project of Chenming
International Logistics Centre and the ancillary railway special line in Shouguang City was passed. The projects will
be funded by internal resources of the Company and bank loans. On 6 August 2009, the Company entered into an
equipment purchase contract for high-end low weight coated paper project with aggregate consideration of
approximately RMB2.0 billion. Details of such matter were issued in the relevant announcements published on
China Securities Journal, Hong Kong Commercial Daily and the website of CHINF on 9 June 2009, 28 July 2009
and 7 August 2009, and on the website of Hong Kong Stock Exchange (www.hkex.com.hk) on 8 June 2009, 27 July
2009 and 6 August 2009.
Unit: RMB’000
As at As at
30 June 31 December
Reason for
Items 2009 2008 Change change
%
Bank balances and cash 3,992,960 2,853,418 39.94 (1)
Financial assets held for trading 12,200 0 100.00 (2)
Bills receivable 2,221,866 974,010 128.12 (3)
Prepayment 657,794 462,526 42.22 (4)
Construction in progress 536,676 431,379 24.41 (5)
Construction materials 27,683 42,080 (34.21) (5)
Consumable biological assets 422,695 301,213 40.33 (6)
Short-term borrowings 4,898,959 1,516,945 222.95 (7)
Financial liabilities held for trading 5,200 199 2,514.38 (8)
Advance receipts 192,987 101,694 89.77 (9)
Tax payables 111,825 49,966 123.80 (10)
Dividends payable 103,138 36 285,686.53 (11)
Non-current liabilities
due within one year 382,381 1,038,125 (63.17) (12)
Other current liabilities 1,252,520 1,941,874 (35.50) (13)
Deferred income 103,077 56,828 81.38 (14)
Explanation on the main reasons leading to the changes:
(1) Bank balances and cash of the Group as at 30 June 2009 increased by 39.94% over 31 December 2008, mainly
because discounted bills of the Group for the six months ended 30 June 2009 led to an increase in bank balances and
cash.
(2) Financial assets held for trading increased by RMB12,200,000.00 during the period, due to the effects of future
pooling foreign exchange contracts of Chenming (HK) Limited.20
III. 1. Analysis of the assets and liabilities of the Company (continued)
(3) Bills receivable increased by 128.12% during the period, mainly because the Group recorded significantly improved
sales compared with the fourth quarter of 2008, increase in income and increase in unmatured discounted bills.
(4) Prepayment increased by 42.22% during the period, primarily due to the increase in amount of prepayments on raw
materials during the period as operating environment improved.
(5) Construction in progress increased by 24.41% during the period. The reduction of 34.21% in construction materials
was mainly due to (1) reclassification of the modification of equipment by the Company and Fuyu Chenming Paper
Co., Ltd. to construction in progress; and (2) the effect of project inputs.
(6) Consumable biological assets increased by 40.33% during the period, mainly due to purchase, growing and fair
value change of forestry by subsidiaries of the Company, i.e. Zhanjiang Chenming Arboriculture Co., Ltd.,
Yangjiang Chenming Arboriculture Co., Ltd., Nanchang Chenming Arboriculture Co., Ltd. and Huanggang
Chenming Arboriculture Co., Ltd.
(7) Short-term borrowings increased by 222.95% during the period, due to (1) increase in unmatured discounted bills;
and (2) the Company increased short-term borrowings to repay short-term debentures.
(8) Financial liabilities held for trading increased by 2,514.38% during the period, primarily due to the effects of future
pooling foreign exchange contracts of the Company.
(9) Advance receipts increased by 89.77% during the period, mainly because the Company received more advanced
payments for goods.
(10) Tax payables increased by 123.8% during the period, mainly due to the increase in income tax and value added tax
payable during the period as a result of an improved economic environment.
(11) Dividends payable increased by RMB103,102,297.05 during the period, primarily due to the dividends for the
previous year declared by the Company in June 2009.
(12) Non-current liabilities due within one year reduced by 63.17% during the period, mainly because the Group repaid
part of the borrowings due within one year upon maturity.
(13) Other current liabilities decreased by 35.5% during the period, principally because the Company repaid short-term
debentures of RMB700 million during the period.
(14) Deferred income increased by 81.38% during the period, mainly because Zhanjiang Chenming Paper Pulp Co., Ltd.,
a subsidiary of the Company, received RMB35 million from Zhanjiang City as grants for the water supply work and
highway network work of its Zhanjiang pulp project.21
III. 1. Analysis of the assets and liabilities of the Company (continued)
2. Significant change and analysis of income statement compared with the corresponding period of last year
Unit: RMB’000
For the For the
six months six months
ended ended
30 June 30 June Reason for
Items 2009 2008 Change change
%
Operating revenue 6,675,367 8,552,402 (21.95) (1)
Operating expenses 5,629,255 6,647,216 (15.31) (2)
Selling expenses 339,929 402,926 (15.63) (3)
Administrative expenses 335,899 265,719 26.41 (4)
Finance expenses 176,847 78,635 124.90 (5)
Losses from impairment of assets 10,603 (30,715) 134.52 (6)
Gains on change in fair value 8,986 16,204 (44.55) (7)
Investment loss (9,532) (12,289) 22.44 (8)
Non-operating income 68,385 168,805 (59.49) (9)
Non-operating expenses 5,323 7,929 (32.87) (10)
Income tax expenses 52,125 267,002 (80.48) (11)
Explanation on the main reasons leading to the changes:
(1) Operating revenue decreased by 21.95% during the period, mainly because sales price in the first half year of 2009
was lower than the corresponding period of last year as affected by the financial crisis.
(2) Operating expenses decreased by 15.31% during the period, primarily due to lower raw material prices in the first
half year of 2009 compared with that of the same period of last year.
(3) Selling expenses decreased by 15.63% during the period, mainly due to lower transportation costs.
(4) Administrative expenses increased by 26.41% during the period, mainly due to loss from production interruption
arising from suspension of certain panel and pulp production lines because of the impact of the financial crisis.
(5) Finance expenses increased by 124.9% during the period, mainly because exchange gains reduced in the first half
year of 2009 as compared with the corresponding period of last year, as a result of the effect of changes in exchange
rates.
(6) Losses from impairment of assets increased by 134.52% during the period, mainly because the Group had more
accounts receivable at the end of June 2009 compared with the beginning of the year, leading to higher provision for
bad debts.
(7) Gains on change in fair value reduced by 44.55% during the period, mainly due to small change in fair value in
timber assets compared with the corresponding period of last year.22
III. 1. Analysis of the assets and liabilities of the Company (continued)
2. Significant change and analysis of income statement compared with the corresponding period of last year (continued)
(8) Investment loss decreased by 22.44% during the period, primarily due to reduced losses of associated corporations
during the period as compared with the corresponding period of last year.
(9) Non-operating income decreased by 59.49% during the period, primarily attributable to (1) lower amount received
in government grants compared with the corresponding period of last year; and (2) negative goodwill arising from
acquisition of minority interests in the corresponding period of last year.
(10) Non-operating expenses reduced by 32.87% during the period as compared with the corresponding period of last
year, mainly due to lower donation expenses for the period compared with the corresponding period of last year.
(11) Income tax expenses decreased by 80.48% over the corresponding period of last year, mainly due to lower realized
profit for the period compared with the corresponding period of last year.23
III. 1. Analysis of the assets and liabilities of the Company (continued)
3. Cash flows from operating activities of the Company during the reporting period
Unit: RMB’000
For the
corresponding
Items For the current period of
period last year Change (%)
Net cash flow generated from
operating activities -526,102 1,710,555 -130.76
Net cash flow generated from
investment activities -352,023 -610,785 42.37
Net cash flow generated from
financing activities 679,032 1,907,705 -64.41
Explanation on the main reasons leading to the changes:
(1) Net cash flow generated from operating activities decreased over the same period of last year, mainly due to (1)
lower sales price during the reporting period led to reduced revenue, as affected by the financial crisis; and (2)
financial grants received during the period was lower than that of the corresponding period of last year.
(2) Net cash flow generated from investment activities recorded increase over the same period of last year, mainly due
to increase in expenses incurred in the corresponding period of last year due to investment in the 120,000-tonne art
paper project and the acquisition of Heilongjiang Sida Paper Company Limited, etc.
(3) Net cash flow generated from financing activities reduced as compared with the same period of last year, mainly due
to (1) the issuance of H Shares in the first half of 2008, and cash flows reduced by RMB2,660.0 million compared
with the corresponding period of last year; (2) decrease of RMB1,360 million in restricted bank deposits (deposits
for letter of credit, promissory notes, etc.) compared with the corresponding period of last year; and (3) increase in
bank borrowings (including short-term debentures) by RMB2,731 million compared with the corresponding period
of last year (mainly because unmatured discounted bills increased by RMB2.4 billion compared with the
corresponding period of last year).24
IV. Warnings on forecast of significant changes in accumulated net profit compared with the
corresponding period of last year for the period the beginning of the year to the end of the
next reporting period, with explanations
Under the repercussion of the global financial crisis, the Company recorded lower average product price in the first three
quarters of 2009 as compared with the same period of last year, which led to lower gross profit margin of the paper products of
the Company. It is expected that the Company’s accumulated net profit will decrease by 60%-80% in January-September 2009
as compared with the corresponding period of last year.
V. Focus of work for the second half of 2009
In relation to the second half of 2009, the Company will be committed to achieving the goals as set in the beginning of the year.
With a view to improving economic efficiency, the Company will continue to focus on brand building, enhance independent
innovation, energy saving, emission reduction, and carry out the construction of new projects, mainly in terms of the following
aspects:
(1) To emphasise on the sales work, strengthen corporate brand building to gain market share in the PRC and overseas
markets;
(2) To enhance independent innovation, promote application of new technologies and skills and actively develop new
products;
(3) To set energy saving and environmental protection as the targets in the corporate development strategies of the Company,
enhance energy saving and emission reduction in order to strengthen its sustainable development capability;
(4) To implement the preparation works for the commencement of operation of high-end low weight coated paper and
international logistic centre, etc.;
(5) To accelerate the progression of forestry-pulp-paper integration projects, with respect to which the construction of
Zhanjiang Pulp Project will be commenced orderly as planned, while our forestry companies in regions including
Guangdong and Hubei will begin forestation on a major scale in acquired forest lands;
(6) To standardise corporate management and improve corporate governance structure so as to fully enhance the operating
quality.25
VI. Material Matters
I. PERSEONNEL INFORMATION
1. Change of personnel
Please refer to “IV. Directors, Supervisors and Senior Management”.
2. Personnel of the Company
As at 30 June 2009, the Group had 16,651 employees in aggregate, including 11,769 production staff, 650 sales staff, 792
technical staff, 361 financial staff, 1,066 administrative staff and 2,013 other staff. The remuneration of the employees of
the Company includes their salaries, bonuses and other fringe benefits. The Company determines different rates of
remuneration for different employees based on their performance, qualifications, duties and other factors in compliance
with the relevant PRC laws and regulations.
II. CORPORATE GOVERNANCE STRUCTURE DURING THE REPORTING PERIOD
The Company’s corporate governance is generally in compliance with the relevant requirements of China
Securities Regulatory Commission (CSRC)
Strictly in compliance with the requirements of the relevant laws and regulations of Company Law ( 《公司法》), Securities Law
(《證券法》), Code of Corporate Governance for Listed Companies (《上市公司治理準則》), listing rules of Shenzhen Stock
Exchange (《深圳證券交易所股票上市規則》), Hong Kong Listing Rules and the related requirements as required by China
Securities Regulatory Commission (“CSRC”), the Company continued to optimize its legal person governance structure, and
established an modern enterprise policy to regulate the operations of the Company.
During the reporting period, as required by the relevant documents of the China Securities Regulatory Commission and the
Hong Kong Stock Exchange, the Company made timely amendments to the Articles of Association, and, in accordance with
the terms of the Articles of Association, amended the Procedural Rules of Shareholders Meetings (《股東大會議事規則》),
Procedural Rules of Board Meetings (《董事會議事規則》) and Procedural Rules of Supervisory Committee Meetings (《監
事會議事規則》).
The state of governance of the Company is currently in compliance with the requirements under the relevant documents of
CSRC.26
III. 2008 PROFIT DISTRIBUTION PLAN AND 2009 INTERIM PROFIT DISTRIBUTION
PLAN
(1) The 2008 profit distribution plan of the Company was considered and approved by the 2008 Annual General Meeting.
Based on 2,062,045,941 shares in the total share capital of the Company, cash bonus of RMB 0.50 was to be paid to all
shareholders for every 10 shares held (tax included, RMB 0.45 to be actually paid to A Share individual shareholders,
investment funds and non-resident enterprises listed in the H share registrar after tax deduction, and in respect of B Share
shareholders, no tax were to be deducted for the time being). Distribution of cash bonuses under such distribution
amounted to RMB 103,102,297.05 (tax included).
For A Shares, the ex-rights date was 15 July 2009. For B Shares, the ex-rights date was 20 July 2008. Cash bonus of RMB
0.5 for every 10 shares (tax included) was to be paid on the basis of the share capital as at the above dates.
(2) The 2009 interim profit distribution plan: no profit distribution was proposed to be implemented, also, no share capital
increase by way of transfer from capital reserves will be carried out.27
IV. MATERIAL ACQUISITION AND DISPOSAL OF ASSETS, ABSORPTIONS AND
MERGERS OF THE COMPANY DURING THE REPORTING PERIOD
The Company had no material acquisition and disposal of assets, absorptions and mergers during the reporting period.
V. MATERIAL LITIGATION AND ARBITRATION
The Company was not subject to any material litigation or arbitration during the reporting period.
VI. UNDERTAKINGS BY HOLDERS OF NON-TRADABLE SHARES DERIVED FROM THE
REFORM OF CONVERSION
1. Undertakings made during the reform of conversion and performance of such undertakings
It was undertaken that shares held by Shouguang Chenming Holdings Co., Ltd., the controlling shareholder of the
Company, shall not be listed and traded with 48 months from the date of implementation of the reform of conversion.
During the reporting period, Shouguang Chenming Holdings Co., Ltd. had strictly adhered to such undertakings.
2. During the reporting, no shareholders holding 5% or above shares of the Company had made any additional undertakings
on shares subject to trading moratorium.28
VII. CONNECTED TRANSACTIONS
Under the relevant requirements under the Listing Rules of Shenzhen Stock Exchange, the Group had no material connected
transactions during the reporting period.
VIII. MATERIAL CONTRACTS AND THEIR PERFORMANCE
During the reporting period, the Company had no material contract matters.
IX. EXTERNAL GUARANTEES
During the reporting period, the Company did not provide any external guarantees or illegal guarantees.
As at 30 June 2009, the balance of guarantee provided by the Company for its controlling subsidiaries amounted to RMB
450,247,900, representing 3.66% of the net assets of the Company attributable to the shareholders of the parent company.
Unit: RMB in ten thousands
External guarantees provided by the Company (excluding guarantees provided for subsidiaries)
Total guarantee provided during
the reporting period 0
Total balance of guarantee provided
at the end of the reporting period (A) 0
Guarantees provided by the Company for subsidiaries
Total guarantee provided for subsidiaries
during the reporting period -33,384.65
Total balance of guarantee provided for
subsidiaries at the end of
the reporting period (B) 45,024.79
Total amount of guarantee provided by the Company (including guarantees provided for subsidiaries)
Total amount of guarantee provided (A+B) 45,024.79
Total amount of guarantee provided a
a percentage of the
net assets of the Company 3.66%
Of which:
Amount of guarantee provided for shareholders,
beneficial controllers and its related parties (C)
—
Amount of guarantee directly or
indirectly provided for obligors
with gearing ratio over 70% (D) 5,000.00
Total amount of guarantee provided
in excess of 50% of net assets (E) —
Sum of the above three amount
of guarantee* (C+D+E) 5,000.0029
X. OTHER SIGNIFICANT MATTERS AND EXPLANATION AND ANALYSIS ON THEIR
IMPACTS AND SOLUTIONS
1. During the reporting period, the Company did not invest in any securities, and the Company did not hold any equity
interests in other listed companies, unlisted financial institutions or prospective listed companies.
2. During the reporting period, except for provision of entrusted loans to subsidiaries of the Company (for details, please
refer to Note 7 in the financial statements and notes prepared in accordance with Accounting Standards for Business
Enterprises), the Company did not appoint any person to manage the Company’s funds during the reporting period or in
the preceding reporting period which had been carried over to this reporting period. Also, there was no significant custody,
subcontracting or lease of the assets between the Company and other companies during the reporting period or in the
preceding reporting period which had been carried over to this reporting period.
3. Independent opinion from Independent Directors of the Company concerning utilisation of funds by related parties and
external guarantees.
After inspection, there existed no utilisation of funds of the Company by controlling shareholders and other related parties
during the reporting period, except for connected transactions with subordinate controlling subsidiaries and participating
companies (for details, please refer to Note 8 in the financial statements and notes prepared in accordance with
Accounting Standards for Business Enterprises). The connected transactions are comparably true and accurate to
represent the routine connected transactions of the Company, which complied with the principle of fair and reasonable,
and related requirements of the Company Law and the Articles of Associations. The prices of the transactions are true and
fair and do not impair the interests of the Company and other shareholders, especially the interest of medium and minority
shareholders, and non-associated shareholders.
After inspection, the external guarantees of the Company during the current period in the first half year of 2009 and
accumulated amount are both nil, except for the guarantees provided to subsidiaries during the reporting period (for
details, please refer to Note 9 in the financial statements and notes prepared in accordance with Accounting Standards for
Business Enterprises). The Company strictly complied with the related requirements of “Notice on Regulating External
Guarantees made by Listed Companies” (Zheng Jian Fa [2005] No. 120) And the Articles of Associations, the Company
has been in strict compliance with the obligation of disclose of the information about external guarantees, and truly
provide the information of all the external guarantees to the qualified accountant according to the rule. During the
reporting period, the guarantees provided to subsidiaries by the Company conform to the requirements of the routine
production and operation and reasonable utilisation of the funds of the Company, its decision making procedure is
legitimate, and do not impair of the interests of the Company and other shareholders, especially the interest of medium
and minority shareholders.30
XI. RECEPTION OF RESEARCH INVESTIGATIONS, COMMUNICATIONS AND
INTERVIEWS DURING THE REPORTING PERIOD
Date of Place of Manner of Main topics of discussion
reception reception reception Parties accommodated and information provided
2009.1.7 Shouguang, On-site research China International Matters including recent development of
Shandong investigation Capital Corporation Limited, the industry and development trend in the
Orktree Capital Management future, production and operation of the
Company, as well as strategic development
2009.2.3 Shouguang, On-site research Galaxy Securities, Matters including recent development of
Shandong investigation Bosera Funds the industry and development trend in the
future, production and operation of the
Company, as well as strategic development
2009.2.5 Shouguang, On-site research Galaxy Securities Matters including recent development of
Shandong investigation the industry and development trend in the
future, production and operation of the
Company, as well as strategic development
2009.2.8 Shouguang, On-site research Sinolink Securities Matters including recent development of
Shandong investigation the industry and development trend in the
future, production and operation of the
Company, as well as strategic development
2009.2.11 Shouguang, On-site research 20 institutions, including Matters including recent development of
Shandong investigation Sinolink Securities the industry and development trend in the
future, production and operation of the
Company, as well as strategic development
2009.2.12 Shouguang, On-site research Guotai Junan Matters including recent development of
Shandong investigation the industry and development trend in the
future, production and operation of the
Company, as well as strategic development
2009.2.25 Shouguang, On-site research Joint research investigation Matters including recent development of
Shandong investigation personnel from CITIC Securities, the industry and development trend in the
specialised in paper-making industry future, production and operation of the
Company, as well as strategic development
2009.2.27 Shouguang, On-site research Everbright Securities, Matters including recent development of
Shandong investigation Donghai Securities the industry and development trend in the
future, production and operation of the
Company, as well as strategic development
2009.3.10 Shouguang, On-site research Gartmore Investment Management Matters including recent development of
Shandong investigation the industry and development trend in the
future, production and operation of the
Company, as well as strategic development31
XI. RECEPTION OF RESEARCH INVESTIGATIONS, COMMUNICATIONS AND
INTERVIEWS DURING THE REPORTING PERIOD (continued)
Date of Place of Manner of Main topics of discussion
reception reception reception Parties accommodated and information provided
2009.3.22 Shouguang, On-site research Shareholders of Zibo Fund Matters including recent development of
Shandong investigation the industry and development trend in the
future, production and operation of the
Company, as well as strategic development
2009.3.25 Shouguang, On-site research Haitong Securities Matters including recent development of
Shandong investigation the industry and development trend in the
future, production and operation of the
Company, as well as strategic development
2009.4.15 Shouguang, On-site research Guosen Securities Matters including recent development of
Shandong investigation the industry and development trend in the
future, production and operation of the
Company, as well as strategic development
2009.4.18 Shouguang, On-site research GF Securities Matters including recent development of
Shandong investigation the industry and development trend in the
future, production and operation of the
Company, as well as strategic development
2009.4.29 Shouguang, On-site research ChinaAMC Matters including recent development of
Shandong investigation the industry and development trend in the
future, production and operation of the
Company, as well as strategic development
2009.5.12 Shouguang, On-site research China International Matters including recent development of
Shandong investigation Capital Corporation Limited the industry and development trend in the
future, production and operation of the
Company, as well as strategic development
2009.5.13 Shouguang, On-site research Goldman Sachs Group, Matters including recent development of
Shandong investigation Beijing Gao Hua Securities the industry and development trend in the
future, production and operation of the
Company, as well as strategic development
2009.6.10 Shouguang, On-site research Industrial Securities Matters including recent development of
Shandong investigation the industry and development trend in the
future, production and operation of the
Company, as well as strategic development
2009.6.11 Shouguang, On-site research Orient Securities Matters including recent development of
Shandong investigation the industry and development trend in the
future, production and operation of the
Company, as well as strategic development32
XII. INDEX OF INFORMATION DISCLOSURE IN THE FIRST HALF YEAR OF 2009
Medium of publication
Date of announcement Subject matter and website address
2009-03-26 H Share announcement http://www.cninfo.com.cn
2009-04-09 Independent opinions from independent directors http://www.cninfo.com.cn
regarding self-evaluation report on internal
control of the Company
2009-04-09 2008 Annual Report summary D025 of China Securities Journal, B7 of Hong Kong
Commercial Daily
http://www.cninfo.com.cn
2009-04-09 Announcement on the resolutions of the 12th D025 of China Securities Journal, B9 of Hong Kong
meeting of the fifth session of the Board of Directors Commercial Daily
http://www.cninfo.com.cn
2009-04-09 Notice of 2008 Annual General Meeting D027 of China Securities Journal, B10 of Hong Kong
Commercial Daily
http://www.cninfo.com.cn
2009-04-09 Announcement on granting of credit facility to D027 of China Securities Journal, B10 of Hong Kong
controlling subsidiaries Commercial Daily
http://www.cninfo.com.cn
2009-04-09 Announcement on resolutions of the 9th meeting D027 of China Securities Journal, B10 of Hong Kong
of the fifth session of the Board of Supervisors Commercial Daily
http://www.cninfo.com.cn
2009-04-09 2008 Annual Report http://www.cninfo.com.cn
2009-04-09 Special explanation on utilisation of funds by http://www.cninfo.com.cn
substantial shareholders and other related parties
2009-04-09 Notice of 2009 First Class Meeting for Holders of D027 of China Securities Journal, B10 of Hong Kong
Domestic Listed Shares and notice of 2009 First Commercial Daily
Class Meeting for Holders of Overseas Listed Shares http://www.cninfo.com.cn
2009-04-09 2008 social responsibility report http://www.cninfo.com.cn
2009-04-09 Self-evaluation report on internal control http://www.cninfo.com.cn
2009-04-09 2008 audited report http://www.cninfo.com.cn
2009-04-18 H Share announcement http://www.cninfo.com.cn
2009-04-29 Announcement on resolutions of the 13th meeting D031 of China Securities Journal, B9 of Hong Kong
of the fifth session of the Board of Directors Commercial Daily
http://www.cninfo.com.cn33
XII. INDEX OF INFORMATION DISCLOSURE IN THE FIRST HALF YEAR OF 2009
(continued)
Medium of publication
Date of announcement Subject matter and website address
2009-04-29 Notice on inclusion of new resolutions D031 of China Securities Journal, B9 of Hong Kong
at the 2008 Annual General Meeting Commercial Daily
http://www.cninfo.com.cn
2009-04-29 First quarterly report 2009 D031 of China Securities Journal, B9 of Hong Kong
Commercial Daily
http://www.cninfo.com.cn
2009-04-29 Announcement on external investment D031 of China Securities Journal, B9 of Hong Kong
Commercial Daily
http://www.cninfo.com.cn
2009-05-09 Indicative announcement on the convening C008 of China Securities Journal, A9 of Hong Kong
of the 2008 Annual General Meeting and Commercial Daily
the 2009 First Class Meeting for Holders of http://www.cninfo.com.cn
Domestic Listed Shares (A Shares and B Shares)
2009-05-27 Procedural rules of Board Meetings http://www.cninfo.com.cn
2009-05-27 Procedural rules of General Meetings http://www.cninfo.com.cn
2009-05-27 Procedural rules of Supervisory Committee Meetings http://www.cninfo.com.cn
2009-05-27 Legal opinions as witnessed by lawyers in http://www.cninfo.com.cn
respect of 2009 First Class Meeting for Holders
of Domestic Listed Shares and 2009 First Clas
Meeting for Holders of Overseas Listed Shares
2009-05-27 Legal opinions as witnessed by lawyers in http://www.cninfo.com.cn
respect of 2008 Annual General Meeting
2009-05-27 Articles of Association http://www.cninfo.com.cn
2009-05-27 Announcement on resolutions D024 of China Securities Journal, A10 of Hong Kong
of 2008 Annual General Meeting Commercial Daily
http://www.cninfo.com.cn
2009-05-27 Announcement on resolutions of 2009 D024 of China Securities Journal, A10 of Hong Kong
First Class Meeting for Holders of Domestic Commercial Daily
Listed Shares and resolutions of 2009 First Class http://www.cninfo.com.cn
Meeting for Holders of Overseas Listed Shares
2009-05-27 First announcement of notice to creditors in D024 of China Securities Journal, A10 of Hong Kong
relation to repurchase of H Shares Commercial Daily
http://www.cninfo.com.cn34
XII. INDEX OF INFORMATION DISCLOSURE IN THE FIRST HALF YEAR OF 2009
(continued)
Medium of publication
Date of announcement Subject matter and website address
2009-06-06 Unusual price and trading volume http://www.cninfo.com.cn
movement of H Shares
2009-06-09 Notice of 2009 First Extraordinary D005 of China Securities Journal, B3 of Hong Kong
General Meeting Commercial Daily
http://www.cninfo.com.cn
2009-06-09 Announcement on resolutions of the 14th meeting D005 of China Securities Journal, B3 of Hong Kong
of the fifth session of the Board of Directors Commercial Daily
http://www.cninfo.com.cn
2009-06-09 Announcement on external investment D005 of China Securities Journal, B3 of Hong Kong
Commercial Daily
http://www.cninfo.com.cn
2009-06-10 Second announcement of notice to creditors B07 of China Securities Journal, A5 of Hong Kong
in relation to repurchase of H Shares Commercial Daily
http://www.cninfo.com.cn
2009-06-20 Third announcement of notice to creditors in C004 of China Securities Journal,
relation to repurchase of H Shares B8 of Hong Kong Commercial Daily
Note: A total of 34 announcements were issued by the Company in the first half year of 2009.35
VII. Unaudited Financial Statements and Notes thereto Prepared in
Accordance with Accounting Standards for Business Enterprises
Balance Sheet
As at 30 June 2009
Consolidated Company
ASSETS Note VII 30 June 2009 31 December 2008 30 June 2009 31 December 2008
RMB RMB RMB RMB
CURRENT ASSETS
Bank balances and cash 1 3,992,960,347.64 2,853,418,128.07 3,496,695,742.65 2,142,439,739.51
Financial assets held for trading 2 12,200,000.00 — — —
Bills receivable 3 2,221,866,092.84 974,009,788.24 1,464,935,031.34 465,681,067.32
Accounts receivable 4 1,991,014,261.79 1,752,409,349.17 2,462,162,273.54 1,937,280,312.86
Advance to suppliers 5 657,794,360.86 462,526,338.87 542,073,876.86 438,759,362.48
Dividends receivable — — 139,874,997.10 164,874,997.10
Other receivables 6 127,041,041.43 135,889,612.93 1,319,954,783.46 936,468,514.72
Inventories 7 2,980,266,373.67 3,397,792,930.38 1,285,339,988.47 1,682,657,074.51
Entrusted loans due within one year 8 — — 896,100,000.00 982,000,000.00
Other current assets 9 127,832,652.63 151,993,045.95 55,810,289.41 52,747,204.98
Total current assets 12,110,975,130.86 9,728,039,193.61 11,662,946,982.83 8,802,908,273.48
NON-CURRENT ASSETS
Entrusted loans 8 — — 870,000,000.00 965,000,000.00
Long-term equity investments 10 89,142,049.02 92,673,769.14 4,098,327,856.90 4,081,859,577.02
Investment properties 11 27,295,596.13 28,164,724.15 27,295,596.13 28,164,724.15
Fixed assets 12 13,727,636,750.57 14,213,441,758.08 5,918,650,618.43 6,258,618,550.53
Construction in progress 13 536,675,503.19 431,379,272.50 108,800,143.28 59,788,891.26
Construction materials 27,683,267.72 42,079,864.21 1,817,374.00 1,981,408.48
Intangible assets 14 1,282,334,460.63 1,277,076,588.53 353,726,291.48 364,509,396.99
Goodwill 15 20,283,787.17 20,283,787.17 — —
Long-term deferred expenditure 16 44,014,023.55 37,227,730.36 — —
Deferred income tax assets 17 132,911,185.39 127,916,366.12 75,357,703.46 78,605,721.73
Consumable biological assets 18 422,695,311.24 301,212,691.14 — —
Total non-current assets 16,310,671,934.61 16,571,456,551.40 11,453,975,583.68 11,838,528,270.16
TOTAL ASSETS 28,421,647,065.47 26,299,495,745.01 23,116,922,566.51 20,641,436,543.6436
Consolidated Company
LIABILITIES AND OWNERS’ EQUITY Note VII 30 June 2009 31 December 2008 30 June 2009 31 December 2008
RMB RMB RMB RMB
CURRENT LIABILITIES
Short-term loans 20 4,898,959,345.72 1,516,945,042.67 4,320,399,962.94 1,144,068,305.68
Financial liabilities held for trading 21 5,200,000.00 198,900.00 5,200,000.00 —
Notes payable 22 326,094,292.58 367,627,562.14 184,923,314.39 210,151,045.59
Accounts payable 23 2,130,086,449.65 2,642,308,185.90 1,639,681,551.17 1,716,031,795.17
Advances from customer 24 192,986,623.31 101,693,578.57 134,725,478.69 66,019,457.87
Employee benefits payable 25 219,919,501.51 190,209,067.13 118,333,048.15 98,888,359.60
Taxes payable 26 111,825,380.13 49,965,982.34 79,721,669.67 16,156,180.51
Dividends payable 27 103,138,386.36 36,089.31 103,138,386.36 36,089.31
Other payables 28 368,345,487.62 346,226,242.06 241,031,732.94 283,099,241.86
Non-current liabilities due within one year 29 382,381,364.15 1,038,125,240.62 280,107,900.00 883,602,600.00
Short-term debentures payable 30 1,252,519,999.98 1,941,874,444.43 1,252,519,999.98 1,941,874,444.43
Total current liabilities 9,991,456,831.01 8,195,210,335.17 8,359,783,044.29 6,359,927,520.02
NON-CURRENT LIABILITIES
Long-term loan 31 4,228,896,509.43 4,019,250,823.86 3,520,606,035.94 3,064,076,035.94
Deferred income 32 103,076,589.48 56,828,375.23 10,387,541.95 5,537,541.95
Deferred income tax liabilities 33 6,929,685.73 6,431,545.79 — —
Total non-current liabilities 4,338,902,784.64 4,082,510,744.88 3,530,993,577.89 3,069,613,577.89
TOTAL LIABILITIES 14,330,359,615.65 12,277,721,080.05 11,890,776,622.18 9,429,541,097.91
OWNERS’ EQUITY
Share capital 34 2,062,045,941.00 2,062,045,941.00 2,062,045,941.00 2,062,045,941.00
Capital surplus 35 6,093,483,801.92 6,093,483,801.92 6,186,218,584.33 6,184,215,988.77
Surplus reserve 36 825,476,850.53 825,476,850.53 813,287,268.62 813,287,268.62
Undistributed profits 37 3,331,577,826.32 3,277,192,810.40 2,164,594,150.38 2,152,346,247.34
Exchange differences on translating foreign operations 869,287.57 879,498.14 — —
Equity attributable to equity holders of the Company 12,313,453,707.34 12,259,078,901.99 11,226,145,944.33 11,211,895,445.73
Minority Interests 38 1,777,833,742.48 1,762,695,762.97 — —
Total equity 14,091,287,449.82 14,021,774,664.96 11,226,145,944.33 11,211,895,445.73
TOTAL LIABILITIES AND OWNERS’ EQUITY 28,421,647,065.47 26,299,495,745.01 23,116,922,566.51 20,641,436,543.64
The notes form an integral part of the financial statements.
The financial statements as set out from page 1 to 96 have been signed by:
Head of Corporation Chief Financial Officer: Head of the finance section37
VII. Unaudited Financial Statements and Notes thereto Prepared in
Accordance with Accounting Standards for Business Enterprises
INCOME STATEMENT
For the six months ended 30 June 2009
Consolidated Company
January - January - January - January -
Note VII June 2009 June 2008 June 2009 June 2008
RMB RMB RMB RMB
Operating revenue 39 6,675,366,559.73 8,552,402,269.40 6,181,612,312.77 7,253,178,510.24
Less: Cost of operations 40 5,629,255,046.18 6,647,216,143.91 5,578,614,295.07 6,161,287,463.14
Tax and levies on operations 41 7,109,033.53 6,755,555.55 154,785.75 135,343.88
Sales expenses 339,929,245.25 402,926,002.43 214,720,116.93 197,903,117.82
Administrative expenses 335,899,354.53 265,718,708.42 114,469,006.05 102,326,327.25
Finance expenses 42 176,847,315.84 78,635,192.38 155,142,424.33 30,691,691.51
Loss on impairment of assets 43 10,603,058.60 (30,714,668.67 ) 12,791,869.13 (21,862,543.25 )
Add: Gain on change in fair value 44 8,985,659.76 16,204,457.27 (5,200,000.00 ) —
Investment income 45 (9,531,720.12 ) (12,289,463.09 ) 36,407,598.41 230,665,587.59
Including: Gain on Investments
in associates and joint ventures (9,531,720.12 ) (12,375,340.05 ) (9,531,720.12 ) (12,375,340.05 )
Operating profit 175,177,445.44 1,185,780,329.56 136,927,413.92 1,013,362,697.48
Add: Non-operating revenue 46 68,384,829.29 168,804,618.70 32,808,385.47 80,045,436.63
Less: Non-operating expenses 47 5,322,631.80 7,929,167.09 4,666,580.20 5,943,534.62
Including: Loss on disposal of non-current assets 4,653,149.89 1,394,490.60 4,449,274.39 739,683.34
Total profit 238,239,642.93 1,346,655,781.17 165,069,219.19 1,087,464,599.49
Less: Income tax expenses 48 52,124,816.31 267,002,051.55 49,719,019.10 218,351,458.24
Net profit 186,114,826.62 1,079,653,729.62 115,350,200.09 869,113,141.25
Net profit attributable to the equity
holders of the Company 157,487,312.97 947,427,409.04 115,350,200.09 869,113,141.25
Minority interests 28,627,513.65 132,226,320.58 — —
Earnings per share
Basic 50 0.076 0.55 0.056 0.50
Diluted 50 N/A N/A N/A N/A
The notes form an integral part of the financial statements.38
VII. Unaudited Financial Statements and Notes thereto Prepared in
Accordance with Accounting Standards for Business Enterprises
Cash Flow Statement
For the six months ended 30 June 2009
Consolidated Company
January - January - January - January -
Note VII June 2009 June 2008 June 2009 June 2008
RMB RMB RMB RMB
Cash Flows from Operating Activities
Cash received from sales of goods,
rendering of services 5,072,568,207.01 8,936,604,199.60 4,131,278,897.79 7,474,230,963.24
Refund of taxes and levies 7,596,994.38 25,236,318.81 — —
Cash received relating to other operating activities 53 101,170,561.40 168,013,655.24 52,407,526.45 84,287,436.24
Subtotal of cash inflows from operating activities 5,181,335,762.79 9,129,854,173.65 4,183,686,424.24 7,558,518,399.48
Cash paid for goods and services 4,710,646,865.64 5,892,637,854.74 4,391,742,107.99 5,392,150,045.39
Cash paid to and on behalf of employees 253,887,714.94 306,891,001.32 94,149,841.11 104,585,529.37
Payments of taxes and levies 343,299,580.44 829,151,747.45 181,207,781.34 503,373,439.22
Cash paid relating to other operating activities 54 399,603,409.25 390,618,258.84 571,437,104.56 4,837,439.32
Subtotal of cash outflows from operating activities 5,707,437,570.27 7,419,298,862.35 5,238,536,835.00 6,004,946,453.30
Net cash flows from operating activities (526,101,807.48 ) 1,710,555,311.30 (1,054,850,410.76 ) 1,553,571,946.18
Cash Flows from Investing Activities
Cash received from investments — — 580,900,000.00 210,300,000.00
Cash received from gain on investments — 85,876.96 50,939,318.53 122,215,844.01
Cash received from disposal of fixed assets, intangible
assets and other long-term assets 19,421,000.00 335,259.76 19,099,922.08 1,006,638.42
Cash received relating to other investing activities 55 47,990,000.00 65,922,610.10 4,850,000.00 42,656,386.46
Subtotal of cash inflows from investing activities 67,411,000.00 66,343,746.82 655,789,240.61 376,178,868.89
Cash paid to acquire fixed assets, intangible assets
and other long-term assets 407,727,921.18 677,118,558.42 21,564,955.31 46,319,258.93
Cash paid on investments 6,000,000.00 10,000.00 406,000,000.00 813,000,000.00
Acquired net cash paid by subsidiary and other
business units 5,706,000.00 — — —
Subtotal of cash outflows from investing activities 419,433,921.18 677,128,558.42 427,564,955.31 859,319,258.93
Net cash flows from investing activities (352,022,921.18 ) (610,784,811.60 ) 228,224,285.30 (483,140,390.04 )39
Consolidated Company
January - January - January - January -
Note VII June 2009 June 2008 June 2009 June 2008
RMB RMB RMB RMB
Cash Flows from Financing Activities
Cash received from investment — 2,661,332,038.20 — 2,661,332,038.20
Cash received from borrowings 6,483,130,711.58 3,110,154,795.66 5,798,764,711.64 2,644,282,458.86
Cash received from issuance of
short-term debentures — 697,200,000.00 — 697,200,000.00
Cash received relating to other financing activities 56 — — — —
Subtotal of cash inflows from financing activities 6,483,130,711.58 6,468,686,833.86 5,798,764,711.64 6,002,814,497.06
Cash repayments of amounts borrowed 3,546,592,000.00 4,301,820,243.76 2,757,800,070.71 3,978,801,801.18
Cash payments for interest expenses,
and distribution of dividends or profits 217,493,000.00 259,162,049.91 160,011,987.42 194,312,585.36
Repayment of the cash accrued by
short-term debentures 700,000,000.00 — 700,000,000.00 —
Cash payments relating to other financing activities 57 1,340,013,989.64 — 1,315,594,417.01 —
Subtotal of cash outflows from financing activities 5,804,098,989.64 4,560,982,293.67 4,933,406,475.14 4,173,114,386.54
Net cash flows from financing activities 679,031,721.94 1,907,704,540.19 865,358,236.50 1,829,700,110.52
Effect of foreign exchange rate changes on cash (1,378,763.33 ) (8,091,780.24 ) (70,524.91 ) (7,336,841.19 )
Net increase in cash and cash equivalents 51 (200,471,770.05 ) 2,999,383,259.65 38,661,586.13 2,892,794,825.47
Add: Balance of cash and cash equivalents
at the beginning of the year 51 2,687,579,159.85 613,826,456.62 2,080,005,634.40 235,957,551.29
Balance of cash and cash equivalents
at the end of the year 51 2,487,107,389.80 3,613,209,716.27 2,118,667,220.53 3,128,752,376.76
The notes form an integral part of the financial statements.40
VII. Unaudited Financial Statements and Notes thereto Prepared in Accordance with Accounting
Standards for Business Enterprises
Statement of Change in Shareholders’ Equity
For the six months ended 30 June 2009
Exchange
differences Attributable
on to the Total
translating equity Total Share- Share-
Share Capital Surplus Undistributed foreign holders of Minority holders’ Share Capital Surplus Undistributed holders’
capital surplus reserve profit operations the company interests equity capital surplus reserve profit equity
RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB
I. Balance at the beginning of the
current year Copy from Chi version 2,062,045,941.00 6,093,483,801.92 825,476,850.53 3,277,192,810.40 879,498.14 12,259,078,901.99 1,762,695,762.97 14,021,774,664.96 2,062,045,941.00 6,184,215,988.77 813,287,268.62 2,152,346,247.34 11,211,895,445.73
II. Changes in the current year (+/-) — — — 54,385,015.92 (10,210.57 ) 54,374,805.35 15,137,979.51 69,512,784.86 — 2,002,595.56 — 12,247,903.04 14,250,498.60
(I) Net profit — — — 157,487,312.97 — 157,487,312.97 15,137,979.51 172,625,292.48 — — — 115,350,200.09 115,350,200.09
(II) Profit and loss directly dealt
with in shareholders’ equity — — — — (10,210.57 ) (10,210.57 ) — (10,210.57 ) — 2,002,595.56 — — 2,002,595.56
I. Others — — — — (10,210.57 ) (10,210.57 ) — (10,210.57 ) — 2,002,595.56 — — 2,002,595.56
Sub-total of (I) and (II) — — — 157,487,312.97 (10,210.57 ) 157,477,102.40 15,137,979.51 172,615,081.91 — 2,002,595.56 — 115,350,200.09 117,352,795.65
(III) Shareholders’ contributions
and decrease in capital — — — — — — — — — — — — —
1. Shareholders’ contributions in capital — — — — — — — — — — — — —
2. Capital Premium — — — — — — — — — — — — —
(IV) Profit distribution — — — (103,102,297.05 ) — (103,102,297.05 ) — (103,102,297.05 ) — — — (103,102,297.05 ) (103,102,297.05 )
1. Transfer to surplus reserves — — — — — — — — — — — — —
2. Distribution to shareholders — — — (103,102,297.05 ) — (103,102,297.05 ) — (103,102,297.05 ) — — — (103,102,297.05 ) (103,102,297.05 )
(V) Acquisition of minority interest — — — — — — — — — — — — —
III. Balance at the end of the current year 2,062,045,941.00 6,093,483,801.92 825,476,850.53 3,331,577,826.32 869,287.57 12,313,453,707.34 1,777,833,742.48 14,091,287,449.82 2,062,045,941.00 6,186,218,584.33 813,287,268.62 2,164,594,150.38 11,226,145,944.33
The notes form an integral part of the financial statements.41
VII. Unaudited Financial Statements and Notes thereto Prepared in
Accordance with Accounting Standards for Business Enterprises
Notes to the financial statements
For the six months ended 30 June 2009
I. General Information
Shandong Chenming Paper Holdings Limited (hereinafter referred as the “Company”), whose predecessor was Shandong
Shouguang Paper Mill Corporation, was reorganized to become a joint stock limited company by way of private placement in
May 1993. In December 1996, with the approval issued by the Shandong Provincial Government (Lu Gu Zi [1996] Document
No. 270) and by the Securities Committee of the State Council (Zheng Wei [1996] Document No.59), the Company was
reorganized to become a joint stock limited company by way of public subscription.
In May 1997, with the approval issued by the Securities Committee of the State Council (Zheng Wei Fa [1997] Document No.
26), the Company issued 115 million B Shares in connection with its international offering. B-shares from this issuance were
listed on the Shenzhen Stock Exchange since 26 May 1997.
In September 2000, with the approval issued by China Securities Regulatory Committee (hereinafter referred as the “CSRC”)
(Zheng Jian Gong Si Zi [2000] Document No. 151), the Company issued 70 million A Shares. A-shares from this issuance
were listed on the Shenzhen Stock Exchange on 20 November 2000.
In June 2008, with the approval issued by the Stock Exchange of Hong Kong Limited (hereinafter referred as the “Stock
Exchange”), the Company issued 355,700,000 H shares. Meanwhile, the relevant state shareholders of the Company
performed the reduction of state-owned shares, by way of transferring to the Social Security Fund Council (the “NSSF
Council”) such number of shares held by it, representing 35,570,000 shares, which were to be converted into overseas listed
foreign shares (H shares). 391,270,000 H-shares were issued and listed on the Hong Kong Stock Exchange on 18 June 2008.
As at 31December 2008, the Company has a total of 2,062,045,941 shares (refer to note VII.34).
The business scope of the Company and its subsidiaries (hereinafter referred as the “Group”) covers: processing and sale of
paper products (including machine made paper and paper board), paper making raw materials and machinery; generation and
sale of electric power and thermal power; forestry, saplings growing, processing and sale of timber; manufacturing, processing
and sale of wood products; and manufacturing and sale of laminated boards and fortified wooden floorboards.
II. Statement of Compliance with the Accounting Standards for Business Enterprises (“ASBEs”)
The financial statements have been prepared in conformity with the ASBEs, which truly and fully reflect the financial positions
of the Company and the Group as at 30 June 2009, and the operating results and cash flows of the Company and the Group for
the six months ended 30 June 2009.42
III. Significant Accounting Policies and Estimates
The following principal accounting policies and accounting estimates are determined based on the ASBEs.
Accounting Year
The fiscal year of the Group is from 1 January to 31 December of each calendar year.
Reporting currency
The currency of the primary economic environment in which the Company and its domestic subsidiaries operate is Renminbi
(“RMB”). The Company and its domestic subsidiaries regard RMB as their reporting currency. Overseas subsidiaries of the
Company recognize U.S. dollar as their reporting currency according to the primary economic environment in which they
subsidiaries operate. The Group prepares its financial statement based on RMB.
Basis of preparation and principle of measurement
The Group’s financial statements have been prepared on an accrual basis. Except for consumable biological assets and certain
financial instruments which are measured at fair value, the financial statements are prepared under the historical cost
convention. A provision for impairment of assets was made according to the accounting policies.
Cash equivalents
Cash equivalents held by the Group represent short-term and highly liquid investments that are readily convertible to known
amounts of cash and which are subject to insignificant risk of value change.
Foreign currency translation
On initial recognition, foreign currency transactions are translated into the reporting currency using the spot exchange rate
prevailing at the date of transaction.
At the balance sheet date, monetary items denominated in foreign currencies are translated to RMB using the spot exchange
rate at that date. Exchange differences arising from the difference between the spot exchange rate on the balance sheet date on
which foreign currency monetary items are translated at the spot exchange rate and the spot exchange rate at the time of initial
recognition or on the last balance sheet date shall be recorded into the profit or loss for the current period.
Non-monetary items denominated in foreign currency measured at historical cost shall continue to be translated into the
reporting currency at the spot exchange rate at the date of transaction.
Exchange differences arising from change in exchange rate where the preparation of consolidated financial statements relates
to overseas operation and foreign currency monetary items materially constitute net investment in overseas operation shall be
recorded into “translation reserve” in the shareholders’ equity: disposal of overseas operation shall be included into profits and
losses on disposal in the current period.43
III. Significant Accounting Policies and Estimates (continued)
Method of determination of the fair value for financial instruments
The fair value refers to the amount, at which both willing parties to a fair transaction who are familiar with the condition
exchange their assets or clear off their debts under fair conditions. Financial instruments exist in an active market. Fair value is
determined based on the quoted price in such market. An active market refers to where pricing is easily and regularly obtained
from exchanges, brokers, industrial organizations and price-fixing service organizations, representing the actual price of a
market transaction that takes place in a fair deal. Financial instruments not only exist in an active market, but fair value is also
determined using valuation techniques. Valuation technologies include reference to be familiar with situation and prices
reached in recent market transactions entered into by both willing parties, reference to present fair values of similar other
financial instruments, cash flow discounting method and option pricing models.
Recognition and measurement of the financial assets
By way of buying and selling the financial assets in a regular way, recognition and derecognition are carried out according to
the accounts on the transaction day. Financial assets are divided into financial assets at fair value through profit or loss,
held-to-maturity investments, loans and the account receivables and available-for-sale financial assets when they are initially
recognized. Financial assets and financial liabilities are initially recognized at fair value. For financial assets and financial
liabilities classified as at fair value through profit or loss, relevant transaction costs are directly recognized in profit or loss for
the current period. For financial assets classified as other categories, relevant transaction costs are included in the amount
initially recognized.
Financial assets are classified at initial recognition with reference to the nature and the purpose of holding. The Group’s
financial assets are mainly trust loans and accounts receivable.
Loans and accounts receivable
Trust loans and accounts receivable adopt the actual interest rate method to carry out the ongoing measure based on amortized
costs. On derecognition, profit or loss arising from impairment or amortization is carried as at profit or loss.44
III. Significant Accounting Policies and Estimates (continued)
Impairment of financial assets
In addition to financial assets at fair value through profit or loss, the Group reviews the book value of other financial assets in
each balance sheet date and provide for impairment where there is objective evidence that financial assets are impaired.
Objective evidence of impairment on financial asset includes those observable matters listed as follows: (1) issuers or debtors
encounter severe financial difficulties; (2) debtors violate terms of contract, such as a breach of rules or delay during settlement
of interests or principal; (3) the Group gives way to those under financial difficulty accounting on economic or legal reasons; (4)
debtors may go into liquidation or conduct other financial reorganization; (5) transaction of the financial assets ceases in the
active market as the issuer encounters great financial difficulties; (6) any reduction in cash flow of certain assets among a
group of financial assets cannot be identified, while it is discovered that the estimated future cash flow of the financial assets
has been reduced and can be measured since initial recognition after an overall evaluation based on disclosed information,
including that the repayment capability of the debtor of the group of financial assets gradually deteriorates, economy
difficulties of the country or region where the debtor is staying appear a situation where this group of financial assets cannot be
paid; (7) significant and adverse changes have taken place in the technological, market, economic or legal environments in
which the debtor operates, making investors of equity instruments difficult to recover the investment cost; (8) substantial or
non-temporary reduction of the fair value of investment on equity instruments; (9) other objective evidence showing signs of
impairment on financial assets.
For a financial asset that is individually significant, the Group assesses the asset individually for impairment. For a financial
asset that is not individually significant, the Group assess the asset individually for impairment or include the asset in a group
of financial assets with similar credit risk characteristics and collectively assess them for impairment. If it is determined that no
objective evidence of impairment exists for an individually assessed financial asset, whether the financial asset is individually
significant or not, the financial asset is included in a group of financial assets with similar credit risk characteristics and
collectively assessed for impairment. Financial assets for which an impairment loss is individually recognized are not included
in the collective assessment for impairment.45
III. Significant Accounting Policies and Estimates (continued)
Impairment of financial assets (continued)
Impairment of loans and accounts receivable
The carrying amount of financial assets measured as costs or amortized costs are subsequently reduced to the present value
discounted from its projected future cash flow. The reduced amount is recognized as impairment loss and recorded as profit or
loss for the period. Upon recognition of the impairment loss from financial assets, if there is objective evidence showing
recovery in value of the amount of such financial assets so impaired and which is related to any event occurring after such
recognition, the impairment loss originally recognized shall be reversed to the extent that the carrying value of the financial
assets upon reversal will not exceed the amortized cost as at the reversal date assuming there is no provision for impairment.
Derecognition of Financial Asset
Financial asset that satisfied any of the following criteria shall be derecognized: (1) the contract right to recover the cash flows
of the financial asset has terminated; (2) the financial asset, along with substantially all the risk and return arising from the
ownership of the financial asset, has been transferred to the transferee; (3) the financial asset has been transferred to the
transferee, and the transferor has given up the control on such financial asset, though it does not assign maintain substantially
all the risk and return arising from the ownership of the financial asset.
Inventory
Inventories of the Group mainly include raw materials, products and finished products. Inventories include purchasing cost,
processing cost and other expenses that help deliver the inventories to the current location and situation.
Inventories are stated at standard costs upon delivery. The amount is adjusted for price variance to arrive at actual cost at the
end of month.
The inventory taking system shall use permanent inventory system.46
III. Significant Accounting Policies and Estimates (continued)
Provision for Inventory Impairment
At the balance sheet date, inventories were calculated at the lower of cost and net realizable value. Provision for inventory
impairment is made when the net realizable value is lower than the cost. Provisions for impairment of inventory shall be made
according to the amount by which the cost of a single item exceeds its net realizable value.
After making the provision for inventory impairment, in case the factors causing inventory impairment no longer exists, and
the net realizable value of an inventory is higher than its book-value, the original provision for inventory impairment shall be
transferred back and incorporated into the profit or loss for the current period.
Net realizable value refers to the amount of the estimated price of inventories less the estimated cost incurred upon completion,
estimated sales expenses and other amounts after tax and levies in daily operation. The realizable value of inventories shall be
determined on the basis of definite evidence, purpose of holding the inventories and effect of after-balance-sheet-date events.
Consumable biological assets
Consumable biological assets refer to biological assets held for sale or to be harvested as agricultural produce in the future,
which include growing commercial forests. Consumable biological assets are stated at cost at initial recognition. The cost of
self-planting, self-cultivating consumable biological assets is the necessary expenses directly attributable to such assets prior to
canopy closure, including borrowing costs eligible for capitalization. Subsequent expenses incurred after canopy closure shall
be included in profit or loss for the current period.
The cost of consumable biological assets shall, at the time of harvest or disposal, be carried forward at carrying value using the
rotation age method.
All the consumable biological assets of the Group are subsequently measured at fair value as they are quoted in an active
market where the Group can obtain a quoted market price and other information of the assets, and thus their fair values can be
reliably estimated. Changes in fair values shall be recognized as profit or loss in the current period.47
III. Significant Accounting Policies and Estimates (continued)
Investment Property
Investment property is held to earn rentals or for capital appreciation or both, including buildings leased out.
Investment property is initially measured at cost. Subsequent expenditures related to an investment property shall be included
in cost of investment property only when the economic benefits associated with the asset will likely flow to the Group and its
cost can be measured reliably. All other expenditures on investment property shall be included in profit or loss for the current
period when incurred.
The Group adopts cost method for subsequent measurement of investment property, which is depreciated or amortized using
the same policy as that for buildings and land use rights.
In the event that an owner-occupied property is converted to an investment property (or vice versa), upon the conversion, the
property shall be stated at the carrying amount prior to the conversion.
When an investment property is sold, transferred, retired or damaged, the amount of proceeds on disposal of the property net of
the carrying amount and related tax and surcharges is recognized in profit or loss for the current period.
Long-term equity investments
For a long-term equity investment acquired through a business combination involving enterprises under common control, the
initial investment cost of the long-term equity investment shall be the absorbing party’s share of the carrying amount of the
owner’s equity of the party being absorbed at the date of combination. For a long-term equity investment acquired through
business combination not involving enterprises under common control, the initial investment cost of the long-term equity
investment acquired shall be the cost of acquisition. The long-term equity investment acquired through means other than a
business combination shall be initially measured at its cost.
Cost method is used to account for a long-term equity investment where the investor does not have joint control or significant
influence over the investee, and the investment is not quoted in an active market and its fair value cannot be reliably measured.
Long-term equity investment with joint control or significant influence on the investee is accounted for using equity method.
Long-term equity investment without control or joint control or significant influence with a fair value which can be reliably
measured is accounted for as available-for-sale financial assets.
In addition, long-term equity investment with control on the investee is accounted for using equity method and record in the
Company’s financial statement.48
III. Significant Accounting Policies and Estimates (continued)
Long-term equity investments (continued)
The term “control” means that the Group has the power to decide an enterprise’s financial and operating policy, pursuant to
which, the Group can get the power to obtain benefits from its operating activities. Joint control is the contractually agreed
sharing of control over an economic activity, which only exists when relevant and important financial affairs and management
decisions related to such economic activity require sharing of control by investors who unanimously agree upon. Significant
influence is the power to participate in the financial and operating policy decisions of an enterprise, but to fail to control or joint
control the formulation of such policies together with other parties.
Long-term equity investment accounted for using the cost method
Under the cost method, a long-term equity investment is measured at its initial investment cost. Investment income recognized
in the current period shall be limited to the amount distributed to it out of accumulated net profits of the investee arising after
the investment was made. Any cash dividends or distributions declared by the investee received in excess of this amount shall
be treated as return of initial investment cost to reduce the carrying amount of the investment.
Long-term equity investment accounted for using the equity method
Under the equity method, where the initial investment cost of a long-term equity investment exceeds the investor’s interest in
the fair value of the investee’s identifiable net assets at the acquisition date, no adjustment shall be made to the initial
investment cost. Where the initial investment cost is less than the investor’s interest in the fair value of the investee’s
identifiable net assets at the acquisition date, the difference shall be charged to profit or loss for the current period, and the cost
of the long term equity investment shall be adjusted accordingly.
Under the equity method, investment gain or loss represents the Group’s share of the net profits or losses made by the investee
for the current period. The Group shall recognize its share of the investee’s net profits or losses based on the fair values of the
investee’s individual separately identifiable assets at the time of acquisition, after making appropriate adjustments thereto in
conformity with the accounting policies and accounting periods of the Group. The unrealized gain or loss from internal
transactions entered into between the Group and its associated enterprises and joint ventures is set off according to the
shareholding attributable to the Group and accounted for as investment income and loss based such basis. However, the
unrealized gain or loss from internal transactions entered into between the Group and its investee is not set up if belonging to
impairment loss from assets transferred according to regulations such as “Accounting Standards for Business Enterprises No. 8
“Assets impairment”. For any changes in shareholders’ equity other than net profits or losses in the investee, the Group shall
adjust the carrying amount of the long-term equity investment and include the corresponding adjustment in shareholders’
equity.49
III. Significant Accounting Policies and Estimates (continued)
Long-term equity investments (continued)
Long-term equity investment accounted for using the equity method (continued)
The Group’s share of net losses of the investee shall be recognized to the extent that the carrying amount of the long-term
equity investment together with any long-term interests that in substance form part of the investor’s net investment in the
investee are reduced to zero. If the Group has to assume additional obligations, the estimated obligation assumed shall be
provided for and charged to the profit or loss as investment loss for the period. Where the investee is making profits in
subsequent periods, the Group shall resume recognizing its share of profits after setting off against the share of unrecognized
losses.
Disposal of long-term equity investments
On disposal of a long-term investment, the difference between the carrying amount of the investment and the actual
consideration paid is recognized in current profit or loss. Where the equity method is adopted, the amount attributable to the
long-term equity investment previously included shareholders’ equity shall be transferred to current profit or loss on a pro-rata
basis.
Acquisition of minority interests
As for minority interests of subsidiaries acquired before 7 August 2008, since acquisition of minority interests increased cost of
long-term equity investment which was compared to fair value of identifiable net assets recognized on the acquisition date of
subsidiaries attributable to the Group calculated according to the proportion of newly acquired shares, the difference of which
recognized as goodwill in the consolidated balance sheet. Since acquisition of minority interests increased cost of long term
equity investment which was compared to fair value of identifiable net assets recognized which are measured based on the
continuous measurement since the acquisition date (or combination date) of subsidiaries attributable to the Group calculated
according to the proportion of newly acquired shares, the difference of which recognized as a portion of goodwill, capital
premium of adjusted capital surplus, the remaining sum of the capital premium insufficient to set off impairment, adjusted
retained earnings.
As for minority interests of subsidiaries acquired on and after 7 August 2008 and upon the preparation of the consolidated
financial statements, since acquisition of minority interests increased cost of long-term equity investment which was compared
to fair value of identifiable net assets recognized which are measured based on the continuous measurement since the
acquisition date (or combination date) of subsidiaries attributable to the Group calculated according to the proportion of newly
acquired shares, the difference of which recognized as adjusted capital surplus, capital surplus insufficient to set off
impairment and adjusted retained earnings.
The Group had not acquired minority interests in any subsidiaries since 7 August 2008.50
III. Significant Accounting Policies and Estimates (continued)
Fixed assets and depreciation
Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for
administrative purposes; and have a useful life of more than one accounting year.
Fixed assets shall be initially measured at cost and the effect of any expected costs of abandoning the asset at the end of its use.
Depreciation is provided over their estimated useful lives from the month after they have reached the working condition for
their intended use using the straight-line method. The useful life, estimated residual value and annual depreciation rate of each
category of fixed assets are as follows:
Category Estimated residue value Useful life Annual depreciation rate
Buildings and structures 5-10% 20-40 years 2.25-4.75%
Machinery and equipment 5-10% 8-20 years 4.50-11.88%
Vehicles 5-10% 5-8 years 11.25-19.00%
Electronic equipment and others 5-10% 5 years 18.00-19.00%
Estimated net residual value of a fixed asset is the estimated amount that the Group would currently obtain from disposal of the
asset, after deducting the estimated costs of disposal, if the asset were already of the stage and in the condition expected at the
end of its useful life.
Subsequent expenditures incurred for a fixed asset shall be included in the cost of the fixed asset, only if it is probable that
economic benefits associated with the asset will flow to the Company and the relevant cost can be measured reliably;
meanwhile the carrying amount of the replaced part shall be derecognized. Other subsequent expenditures shall be charged to
profit or loss when incurred.
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method applied at least
at each financial year-end. A change in the useful life or estimated net residual value of a fixed asset or the depreciation method
used shall be accounted for as a change in accounting estimate.
When a fixed asset is sold, transferred, retired or damaged, the Group shall recognize the amount of any proceeds on disposal
of the asset net of the carrying amount and related taxes in profit or loss for the current period.51
III. Significant Accounting Policies and Estimates (continued)
Construction in progress
Construction in progress is recognized based on the actual construction cost, including all expenditures incurred for
construction projects, capitalized borrowing costs for the construction in progress before it has reached the working condition
for its intended use, and other related expenses during the construction period. A construction in progress is transferred to fixed
assets when it has reached the working condition for its intended use.
Intangible assets
An intangible asset is an identifiable non-monetary asset without physical substance owned or controlled by the Group.
An intangible asset shall be initially measured at cost. The expenditures incurred on an intangible asset shall be recognized as
cost of the intangible asset only if it is probable that economic benefits associated with the asset will flow to the Group and the
cost of the asset can be measured reliably. Other expenditures on an intangible asset shall be charged to profit or loss when
incurred.
Land use right acquired shall normally be recognized as an intangible asset. Self-constructed buildings (e.g. plants), related
land use right and the buildings shall be separately accounted for as an intangible asset and fixed asset. For buildings and
structures purchased, the purchase consideration shall be allocated among the land use right and the buildings on a reasonable
basis. In case there is difficulty in making a reasonable allocation, the consideration shall be recognized in full as fixed assets.
All the intangible assets of the Group have a finite useful life. An intangible asset with a finite useful life shall be amortized
using the straight-line method over its useful life when the asset is available for use. The Group shall review the useful life of
intangible asset and the amortization method applied at least at each financial year-end. A change in the useful life or
amortization method used shall be accounted for as a change in accounting estimate.52
III. Significant Accounting Policies and Estimates (continued)
Intangible assets (continued)
The estimated useful life of the Company’s intangible assets is set out as follows:
Category Useful life
Land use rights 50 years
Software 5-10 years
Long-term deferred expenses
Long-term deferred expenses are expenditures and other expenses which have incurred but that shall be amortized over the
current period and subsequent periods of more than one year. Long term deferred expenses are amortized evenly over the
estimated benefit period.
Impairment of non-monetary assets
The Group assesses at each balance sheet date whether there is any indication that any long-term equity investment, investment
properties, fixed assets, construction in progress, construction materials and intangible assets may be impaired. If there is any
evidence indicating that an asset may be impaired, recoverable amount shall be estimated for the individual asset. If it is not
possible to estimate the recoverable amount of the individual asset, the Group shall determine the recoverable amount of the
asset group to which the asset belongs. If the recoverable amount of an asset is less than its carrying amount, the reduction is
recognized as an impairment loss and charged to profit or loss for the current period. A provision for impairment loss of the
asset is recognized accordingly.
Goodwill arising in a business combination shall be tested for impairment annually, irrespective of whether there is any
indication that the asset may be impaired. For the purpose of impairment testing, goodwill shall be considered together with the
related asset groups or sets of asset groups. For the purpose of impairment testing, the carrying amount of goodwill shall, from
the acquisition date, be allocated on a reasonable basis to each of the related asset groups. If the recoverable amount is less than
the carrying amount, the Group shall recognize an impairment loss. The amount of impairment loss shall first reduce the
carrying amount of any goodwill allocated to the asset group or set of asset groups, and then reduce the carrying amount of
other assets (other than goodwill) within the asset group or set of asset groups, pro rata on the basis of the carrying amount of
each asset.
The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the future cash
flows expected to be derived from the asset. An asset’s fair value is the price in a sale agreement in an arm’s length transaction.
If there is no sale agreement but the asset is traded in an active market, fair value shall be determined based on the bid price. If
there is neither sale agreement nor active market for an asset, fair value shall be based on the best available information. Costs
of disposal are expenses attributable to disposal of the asset, including legal fee, relevant tax and surcharges, transportation fee
and direct expenses incurred to prepare the asset for its intended sale.
An impairment loss recognized shall not be reversed in a subsequent period.53
III. Significant Accounting Policies and Estimates (continued)
Financial liability
At initial recognition, financial liabilities are classified either as “financial liabilities at fair value through profit or loss” or
“other financial liabilities”. The financial liabilities of the Group are mainly other financial liabilities, which include payables,
loans and debenture payables.
Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Gains or losses
arising from derecognition or amortization is recognized in profit or loss for the period.
Financial Guarantee Contract
Financial guarantee contracts other than those designated as financial liabilities at fair value through profit or loss are initially
recognized at fair value, and shall be subsequently measured at the higher of the following: (1) the amount determined in
accordance with Accounting Standard for Business Enterprises No. 13 “Contingencies”; and (2) the amount initially
recognized less cumulative amortization recognized in accordance with the principles set out in Accounting Standard for
Business Enterprises No. 14 “Revenue”.
Derivative Instruments
Derivative instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are
subsequently measured at fair value. Any gains or losses arising from changes in fair value of derivatives are taken directly to
profit or loss for the period, except for derivative instruments that are designated as hedging instruments and which are highly
effective in hedging, gains or losses arising from changes in their fair value are taken to the profit or loss for the period in
accordance with the hedge accounting requirement based on the nature of hedging relationships.54
III. Significant Accounting Policies and Estimates (continued)
Employee Benefits
In the accounting period in which an employee has rendered services, the Group shall recognize the employee benefits payable
as a liability.
The Group participates in social security systems operated by the government. Payments of social security contributions for
employees, such as premiums or contributions on pensions, medical insurance, payments of housing funds and other social
welfare contributions shall be included in the cost of related assets or profit or loss for the period in which they are incurred.
When the Group terminates the employment relationship with employees before the expiry of the employment contracts or
provides compensation as an offer to encourage employees to accept voluntary redundancy, if the Group has a formal plan for
termination of employment relationship or has made an offer for voluntary redundancy, which will be implemented
immediately, and the Group cannot unilaterally withdraw from the termination plan or the redundancy offer, a compensation
liability arising from the termination of employment relationship with employees should be charged to the profit or loss for the
current period.
An internal retirement plan is accounted for using the same principles as described above. Salaries and social insurance
contributions to be paid to the internally retired employees by the Group during the period from the date when the employee
ceases to provide services to the normal retirement date are recognized in profit or loss for the period when the recognition
criteria for provisions are met (termination benefits).
Offset of Financial Assets and Financial Liabilities
If the Group owns the legitimate rights of offsetting the recognized financial assets and financial liabilities, which are
enforceable currently, and the Group plans to realize the financial assets or to clear off the financial liabilities by net amount
method, the amount of the offsetting financial assets and financial liabilities shall be reported in the balance sheep. Otherwise,
financial assets and financial liabilities are presented separately in the balance sheet without offsetting.55
III. Significant Accounting Policies and Estimates (continued)
Revenue recognition
Revenue from sales of goods
Revenue is recognized when the Company has transferred to the buyer the significant risks and rewards of ownership of the
goods, retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control
over the goods sold, will receive the economic benefits associated with the transaction, and can reliably measure the relevant
amount of revenue and costs.
Sales of electricity
Sales of electricity are recognized when electricity are generated and transmitted to the power grid operated by the local
electric power company.
Sales of steam
Sales of steam are recorded based upon output delivered at rates specified under contract terms.
Interest income
Interest income is measured based on the length of time for which the Group’s cash is used by others and the effective interest
rate.56
III. Significant Accounting Policies and Estimates (continued)
Government grant
Government grants are transfer of monetary assets or non-monetary assets from the government to the Group at no
consideration, excluding capital considerations from the government as an owner of the Group. Government grants are
classified into government grants related to assets and government grants related to income. Government grant shall be
recognized when, and only when the related criteria are met.
If a government grant is in the form of a transfer of monetary asset, the item shall be measured at the amount received or
receivable. If a government grant is in the form of a transfer of non-monetary asset, the item shall be measured at fair value. If
fair value is not reliably determinable, the item shall be measured at a nominal amount and recognized immediately in profit or
loss for the current period.
A government grant related to an asset shall be recognized as deferred income, and evenly amortized to profit or loss over the
useful life of the asset. For a government grant related to income, if the grant is a compensation for related expenses or losses
to be incurred in subsequent periods, the grant shall be recognized as deferred income, and recognized in profit or loss over the
periods in which the related costs are recognized; if the grant is a compensation for related expenses or losses already incurred,
the grant shall be recognized immediately in profit or loss for the current period.
For the repayment of a government grant already recognized, if there is any related deferred income, the repayment shall be off
set against the carrying amount of the deferred income, and any excess shall be recognized in profit or loss for the current
period; if there is no related deferred income, the repayment shall be recognized immediately in profit or loss for the current
period.57
III. Significant Accounting Policies and Estimates (continued)
Borrowing costs
Borrowing costs include interest, amortization of discounts or premiums related to borrowings, ancillary costs incurred in
connection with the arrangement of borrowings, and exchange differences arising from foreign currency borrowings. For
borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, when
expenditures for the asset and borrowing costs are being incurred, activities relating to the acquisition, construction or
production of the asset that are necessary to prepare the asset for its intended use or sale have commenced, such borrowing
costs shall be capitalized as part of the cost of that asset; and capitalization shall discontinue when the qualifying asset is ready
for its intended use or sale. Other borrowing costs shall be recognized as expense in the period in which they are incurred.
Where funds are borrowed for a specific purpose, the amount of interest to be capitalized shall be the actual interest expense
incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used
into banks or any investment income on the temporary investment of those funds. Where funds are borrowed for general
purpose, the Group shall determine the amount of interest to be capitalized on such borrowings by applying a capitalization
rate to the weighted average of the excess amounts of cumulative expenditures on the asset over and above the amounts of
specific-purpose borrowings. The capitalization rate shall be the weighted average of the interest rates applicable to the
general-purpose borrowings.
During the capitalization period, exchange differences related to the principal and interest on a specific purpose borrowing
denominated in foreign currency shall be capitalized as part of the cost of the qualifying asset. Exchange differences related to
the principal and interest on general-purpose borrowings denominated in foreign currency shall be included in profit or loss for
the current period.
Qualifying assets are assets (fixed assets, investment property, consumable biological assets, etc) that necessarily take a
substantial period of time for acquisition, construction or production to get ready for their intended use or sale.
Capitalization of borrowing costs shall be suspended during periods in which the acquisition, construction or production of a
qualifying asset is interrupted abnormally, when the interruption is for a continuous period of more than 3 months, until the
acquisition, construction or production of the qualifying asset is resumed.58
III. Significant Accounting Policies and Estimates (continued)
Income Tax
Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods shall be measured at the
amount expected to be paid (or recovered) according to the requirements of tax laws. Taxable profits, which are the basis for
calculating the current income tax expense, are determined after adjusting the accounting profits before tax for the period in
accordance with relevant requirements of tax laws.
Deferred income tax assets and deferred income tax liabilities
Temporary differences arising from the difference between the carrying amount of an asset or liability and its tax base, and the
difference between the tax base and the carrying amount of those items that are not recognized as assets or liabilities but have
a tax base that can be determined according to tax laws, shall be recognized as deferred income tax assets and deferred income
tax liabilities using the balance sheet liability method.
Deferred income tax liabilities are not recognized for taxable temporary differences related to: the initial recognition of
goodwill; and the initial recognition of an asset or liability in a transaction which is neither a business combination nor affects
accounting profit or taxable profit (or deductible loss) at the time of the transaction. In addition, the Group recognizes the
corresponding deferred income tax liability for taxable temporary differences associated with investments in subsidiaries,
associates and joint ventures, except when both of the following conditions are satisfied: the Group able to control the timing of
the reversal of the temporary difference; and it is probable that the temporary difference will not reverse in the foreseeable
future.
Deferred income tax assets are not recognized for deductible temporary differences related to the initial recognition of an asset
or liability in a transaction which is neither a business combination nor affects accounting profit or taxable profit (or deductible
loss) at the time of the transaction. In addition, the Group recognizes the corresponding deferred income tax asset for
deductible temporary differences associated with investments in subsidiaries, associates and joint ventures to the extent that it
is probable that taxable profits will be available against which the deductible temporary differences can be utilized, except
when both of the following conditions are satisfied: it is not probable that the temporary difference will reverse in the
foreseeable future; and it is not probable that taxable profits will be available in the future, against which the temporary
difference can be utilized.59
III. Significant Accounting Policies and Estimates (continued)
Income Tax (continued)
Current income tax (continued)
The Company recognizes a deferred income tax asset for the carry forward of deductible losses and tax credits to subsequent
periods, to the extent that it is probable that future taxable profits will be available against which the deductible losses and tax
credits can be utilized.
At the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at the tax rates that are
expected to apply to the period when the asset is realized or the liability is settled, according to the requirements of tax laws.
At the balance sheet date, the Company shall review the carrying amount of a deferred income tax asset. If it is probable that
sufficient taxable profits will not be available in future periods to allow the benefit of the deferred income tax asset to be
utilized, the carrying amount of the deferred income tax asset shall be reduced. Any such reduction in amount shall be reversed
when it becomes probable that sufficient taxable profits will be available.
Income tax expense
Income tax expense comprises current income tax expense and deferred income tax expense.
Current income tax expense (current income tax income) and deferred income tax expense (deferred income tax income) are
included in profit or loss for the current period, except for: current income tax and deferred income tax related to transactions
or events that are directly recognized in owners’ equity, which are recognized directly in owners’ equity, and deferred income
tax arising from a business combination, which is adjusted against the carrying amount of goodwill.
Offset of income tax
After granted the legal rights of net settlement and with the intention to use net settlement or obtain assets, repay debt, the
Group, at the same time, records the net amount after offsetting its current income tax assets and current income tax liabilities.
The Group was granted the legal rights of net settlement of current income tax assets and current income tax liabilities.
Deferred income tax assets and deferred income tax liabilities are related to income tax to be paid by the same entity liable to
pay tax to the same tax collection and management authority or related to different entities liable to pay tax, but the relevant
entity liable to pay tax is intended to apply net settlement of current income tax assets and liabilities or, at the same time, obtain
assets, repay debt whenever every deferred income tax assets and liabilities with importance would be reversed in the future,
the Group records the net amount after offsetting its current income tax assets and current income tax liabilities.60
III. Significant Accounting Policies and Estimates (continued)
Business combination
Business combination refers the transaction or event to combine two or more independent entities into one reporting subject.
Business combination is classified into business combination under common control and not under common control.
The Group recognizes assets and liabilities obtained arising from business combination recognized on the date of merger or
acquisition. The date of merger or acquisition means the date on which the controlling right of the entity being merged or of the
acquiree is obtained, which is the date on which the control over the net assets or production and management decision is
assigned to the Group.
Business combinations and goodwill not involving entities under common control
A business combination not involving entities under common control is a business combination in which all of the combining
entities are not ultimately controlled by the same party or parties both before and after the business combination. For business
combination not involving entities under common control, the acquirer is the entity that obtains control of the other entities
participating in the combination at the acquisition date, and the other entities participating in the combination are the acquirees.
For business combination not involving entities under common control, the cost of a business combination is the aggregate of
the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the
acquirer, in exchange for control of the acquiree plus any costs directly attributable to the business combination. When the
business combination is achieved in stage, the cost of the combination is the aggregate cost of the individual transactions.
When a business combination agreement provides for an adjustment to the cost of the combination contingent on future events,
the acquirer shall include the amount of that adjustment in the cost of the combination at the acquisition date if the adjustment
is probable and can be measured reliably.
The acquiree’s identifiable assets, liabilities and contingent liabilities acquired from business combination not involving
entities under common control are recognised at their fair values at the acquisition date if the recognition conditions are met.
Where the cost of a business combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net
assets, the difference is recognized as goodwill. Where the cost of a business combination is less than the acquirer’s interest in
the fair value of the acquiree’s identifiable net assets, the acquirer reassesses the measurement of the fair values of the
acquiree’s identifiable net assets, liabilities and contingent liabilities and the measurement of the cost of combinations. If after
that reassessment, the cost of combination is still less than the acquirer’s interest in the fair value of the acquiree’s identifiable
net assets, the difference is recognized in the profit or loss for the current period.61
III. Significant Accounting Policies and Estimates (continued)
Debt restructuring
The term “debt restructuring” refers to an event in which the settlement of a debt is arrived in as a result of a mutual agreement
between a debtor and a creditor or a judgment of a court when the debtor gets into a financial problem.
Obligations to record debt restructuring as debtor
When a debt is liquidated by cash, the creditor shall include the difference between the book balance of the debt to be
restructured and the cash received in the current profits and losses. When a debt is liquidated by a non-cash asset, the creditor
shall include the difference between the book balance of the debt to be restructured and the fair value of the non-cash asset
received in the current profits and losses. When a debt is converted into capital, the creditor shall include the difference
between the fair value of the shares to which it becomes entitled as investment to the debtor and the book balance of the debt to
be restructured into the current profits and losses. Where other terms of a debt are modified, the creditor shall regard the
post-modification fair value of the debt as the book value of the restructured debt, and shall include the difference between the
book balance of the debt to be restructured and the book value of the restructured debt in the current profits and losses. Where
a debt restructuring is made by a combination of several methods, the debtor shall offset, one by one, the cash received, the fair
value of the non-cash asset received, and the fair value of the shares to which the creditor becomes entitled to offset against the
book balance of the debt to be restructured, then handle it in accordance with the aforesaid provisions of modification of other
terms of a debt.
If the creditor has made provision for the impairment of the debt to be restructured, it shall first offset the aforesaid difference
against the impairment provision, and then include the shortfall in the current profits and losses.
When a debt is liquidated by cash, the creditor shall include the difference between the book balance of the debt to be
restructured and the cash received in the current profits and losses. When a debt is liquidated by a non-cash asset, the creditor
shall include the difference between the book balance of the debt to be restructured and the fair value of the non-cash asset
received in the current profits and losses. When a debt is converted into capital, the creditor shall include the difference
between the fair value of the shares to which it becomes entitled as investment to the debtor and the book balance of the debt to
be restructured into the current profits and losses. Where other terms of a debt are modified, the creditor shall regard the
post-modification fair value of the debt as the book value of the restructured debt, and shall include the difference between the
book balance of the debt to be restructured and the book value of the restructured debt in the current profits and losses. Where
a debt restructuring is made by a combination of several methods, the debtor shall offset, one by one, the cash received, the fair
value of the non-cash asset received, and the fair value of the shares to which the creditor becomes entitled to offset against the
book balance of the debt to be restructured, then handle it in accordance with the aforesaid provisions of modification of other
terms of a debt.62
III. Significant Accounting Policies and Estimates (continued)
Obligations to record debt restructuring as debtor (continued)
If the creditor has made provision for the impairment of the debt to be restructured, it shall first offset the aforesaid difference
against the impairment provision, and then include the shortfall in the current profits and losses.
Lease
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. Title may or may not eventually be transferred. All other leases are classified as operating leases.
Operating lease business with the Group recorded as lessee
Lease payment for operating lease is recognized as related asset cost or profits and losses for the current period using the
straight-line method over the lease term. The initial direct cost is accounted in profit or loss for the current period. Contingent
rent is recognized as profit or loss for the current period upon occurrence.
Operating lease business with the Group recorded as lessor
Rental income is recognized in profit or loss for the current period using the straight-line method over the lease term. The
initial direct cost where the amount is larger is capitalized when incurred, and accounted for as profit or loss for the current
period on the same basis as recognition of rental income over the entire lease period. Contingent rental is accounted for as
profit or loss for the period in which it is incurred.63
III. Significant Accounting Policies and Estimates (continued)
Basis for Preparation of Consolidated Financial Statements
The scope of consolidated financial statements is determined on the basis of control. Control is the power to govern the
financial and operating policies of an entity so as to obtain benefits from its operating activities.
The Group recognizes the date when control of subsidiaries was substantially transferred as the date of acquisition or disposal.
For disposal of subsidiaries, operating results and cash flows of such subsidiaries from the period beginning to the date of
disposal are included into the consolidated income statement and consolidated cash flow statement; for disposal of subsidiaries
during the reporting period, no adjustment shall be made to the opening balance of the consolidated balance sheet. For those
subsidiaries acquired not controlled by the same parent, the operating results and cash flows after the acquisition date have
been properly included in the consolidated income statements and consolidated cash flow statements. No adjustments shall be
made to the opening balance of the consolidated balance sheet and the comparative consolidated financial statements amount.
For those subsidiaries acquired or disposed controlled by the same parent company, the operating results and cash flows from
the opening of the consolidation period to the consolidation date are also presented in the consolidated income statement and
the consolidated cash flow statements. The comparative consolidated financial statements amount is also adjusted respectively.
Major accounting policies and accounting periods adopted by the subsidiaries are defined according to the standardized
accounting policies and accounting periods stipulated by the Company.
All significant intra-group accounts and transactions between the parent company and its subsidiaries or between subsidiaries
are eliminated on consolidation.
The portion of a subsidiary’s equity that is not attributable to the parent is treated as minority interests and presented as
“minority interest” in the consolidated balance sheet within owners’ equity. The portion of net profits or losses of subsidiaries
for the period attributable to minority interests is presented in the consolidated income statement under the” net profit” line
item as “minority interests”. When the amount of loss attributable to the minority shareholders of a subsidiary exceeds the
minority shareholders’ portion of the opening balance of owners’ equity of the subsidiary, where the minority shareholders
have a binding obligation under the articles of association or an agreement and are able to make an additional investment to
cover the loss, the excess amount shall be allocated against minority interest; otherwise the excess amount shall be allocated
against shareholders’ equity attributable to the parent. If the subsidiary subsequently reports profits, such profits shall be
allocated to shareholders’ equity attributable to the parent until the minority shareholders’ share of losses previously absorbed
by the parent has been recovered.64
III. Significant Accounting Policies and Estimates (continued)
Translation of Financial Statements Denominated in Foreign Currency
The financial statements denominated in foreign currency of a foreign operation are translated to RMB in comply with the
following requirement: assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at the
balance sheet date; all equity items except for inappropriate profits are translated at the spot exchange rates at the dates on
which such items arose; income and expenses in the income statement are translated at the spot exchange rate at the date of
transaction; the inappropriate profits brought forward are reported at the prior year’s closing balance; the inappropriate profits
carried forward are calculated, based on the translated amounts of profits and other profit appropriation items; and all exchange
differences resulting from the translation are recognized separately as “translation reserve” in the shareholders’ equity on the
balance sheet.
On disposal of foreign operations, exchange differences arising from the translation of financial statements denominated in
foreign currencies related to the disposed foreign operation which has been included in shareholders’ equity in the balance
sheet, shall be transferred to profit or loss in whole or in proportionate share in the period in which the disposal took place.
Cash flow dominated in foreign currency or from foreign subsidiaries shall be translated at the spot exchange rate when it
incurs. Effects arising from changes of exchange rate of cash and cash equivalents shall be presented separately as “Effect of
changes in exchange rates on cash and cash equivalents” in the cash flow statement.
The opening balances and prior year’s figures are presented according to the translated amounts of the prior year.
Related parties
If a party has the power to control, jointly control or exercise significant influence over another party, they are regarded as
related parties. Two or more parties are also regarded as related parties if they are subject to control, joint control or significant
influence from the same party.65
IV. Critical judgments based on Significant Accounting Policies and Key Assumptions and
Uncertainties in Accounting Estimates
In the application of the Group’s accounting policies, which are described in Note III, the Group is required to make judgments,
estimates and assumptions about the carrying amounts of items in the financial statements due to the uncertainties associated
with operating activities. These judgments, estimates and assumptions are based on historical experience of the Group’s
management as well as other factors that are considered to be relevant. Actual results may differ from these estimates.
The aforementioned judgments, estimates and assumptions are reviewed regularly by the Group on a going concern basis.
Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that
period or in the period of the revision and future periods if the revision affects both current and future periods.
Critical judgments in applying the Group’s accounting policies
In the application of the Group’s accounting policies, management has made the following judgments that have the most
significant effect on the amounts recognized in the consolidated financial statements:
Timing of transfer of constructions in progress to fixed assets
In determining the timing when the construction in progress, especially for large-scale paper manufacturing plant and
machinery, is transferred to fixed assets requires the Group to determine whether all the activities necessary to bring fixed
assets to be ready for their intended use are completed and related direct expenditure are included in the cost of asset. Such
determination requires the use of management’s judgment and experience.
Provision for bad debts
The Group recognizes provision for bad debts according to the recoverability of receivables. When there is evidence indicating
that a receivable item is not collectible, provision for bad debts will be recognized. Recognition of bad debts requires the use of
judgments and estimates. If the result of new estimates differs from the original estimates, such difference will impact the
carrying amount of receivables for the corresponding period.
Provision for inventory impairment
Provision for inventory impairment is recognized according to the net realizable value of the inventory. Provision for inventory
impairment will be recognized when there is evidence indicating that the net realizable value is lower than the cost.
Recognition of net realizable value involves the use of judgments and estimates. If the result of new estimates differs from the
original estimates, such difference will impact the carrying value of inventory for the corresponding period.66
IV. Critical judgments based on Significant Accounting Policies and Key Assumptions and
Uncertainties in Accounting Estimates (continued)
Recognition of deferred income tax assets
The Group assesses whether recognition of deferred income tax assets is required at each balance sheet date. Deferred income
tax assets relating to certain deductible temporary differences and tax losses are recognized when the Group considers it is
probable that future deductible taxable profits will be available against which the temporary differences or tax losses can be
utilized. In assessing whether it is probable that future deductible taxable profits will be available against which the temporary
differences or tax losses can be utilized requires the use of appropriate judgments and estimates.
Depreciation of fixed assets
Fixed assets are provided and depreciated on a straight-line basis over their estimated useful lives, after taking into account
their residual value. The Group assesses annually the residual value and the useful life of the fixed assets. If revaluation takes
place, the expectation differs from the original estimate. Such difference will impact the book value of fixed assets in the year
in which such estimate has been changed.
Impairment of fixed assets
The Group assesses annually whether fixed assets have any indication of impairment in accordance with the accounting policy.
The recoverable amounts of fixed assets have been determined based on the higher of value-in-use calculations and fair value
less cost to sell. These calculations require the use of judgment and estimates of the management. Where the actual future cash
flows are less than expected, a material impairment loss may arise.
Impairment of goodwill
When conducting goodwill impairment test, the present value of projected future cash flow of the underlying assets or portfolio
of assets incorporating such goodwill will be calculated, and projection of the future cash flow of those assets or portfolio of
assets will be made, and a pre-tax interest rate shall be determined which can properly reflect the prevailing time value of
currency in the market as well as the specific risks relevant to such assets. If such estimated interest rate is lower than the actual
interest rate or the actual cash flow is lower than the initial estimated cash flow, it is required to recognize additional
impairment. Such impairment will impact the goodwill impairment during the period when such judgment was made.67
V. Taxation
Taxes that the Group is subject to include value added tax, enterprise income tax, business tax, and property tax and land use
tax.
Value Added Tax
Value added tax (“VAT”) payable is the net difference between output VAT less deductible input VAT. The effective tax rates
of output VAT and input VAT of the Group’s relevant VAT items are as follows:
Items Tax rate
%
Product sold in the domestic market (output VAT) 17
Paper core sales, printing (output VAT) 17
Purchase of barley grass, pampas grass (input VAT) 13
Steam power for production use (input VAT) 13
Electric power for production use (input VAT) 17
Sodium silicate, paperboard for production use (input VAT) 17
Purchase of waste paper (input VAT) 10
Coal (input VAT) 13
Pursuant to Cai Shui [1995] No. 44 “Circular on VAT Exemption for Certain Products Applying Integrated Use of Resources”
issued by the State Administration of Taxation (《國家稅務總局對部分資源綜合利用產品免徵增值稅的通知》)terprises
engaged in utilization of raw materials containing not less than 30% of coal gangue, stone coal, coal ash, bottom ash of coal
boiler (excluding blast furnace water quenching residue) in the production of buildings products shall be exempted from VAT.
Wuhan Chenjian New-style Wall Materials Co., Ltd. (《武漢晨建新型墻體材料有限公司》), a subsidiary of the Company,
utilizes raw materials containing above 30% of coal ash in its production. It is thus qualified as an enterprise engaged in the
utilization of waste in production and is exempted from VAT in the latter half of 2008.
Pursuant to Cai Shui [2001] No. 78 “Circular on the VAT Policy concerning Waste Collection Business” issued by the State
Administration of Taxation(《國家稅務總局關於廢舊物資回收經營業務有關增值稅政策的通知》), since 2001, general
taxpayers engaging in the sale of waste materials business will be exempted from VAT. Accordingly, Qihe Chenming Waste
Collection Co., Ltd.（吉林晨鳴廢舊物資回收有限公司）, Jilin Chenming Waste Collection Co., Ltd. （壽光市潤生廢紙
回收有限責任有限公司）and Shouguang City Run Sheng Wasted Paper Recycle Co., Ltd.°]π?；′o虝oo^¨≥≠≠
≥dù≥≠≠§Ωq°^, subsidiaries of the Company, are covered by the preferential policy of VAT exemption.
Pursuant to Cai Shui Zi [1995] No. 44 “Circular on VAT Exemption for Certain Products Applying Integrated Use of
Resources” issued by the Ministry of Finance and the State Administration of Taxation(《財政部、國家稅務總局關於對部
分資源綜合利用產品免徵增值稅問題的通知》)and the relevant requirements of Cai Shui Zi [2001] Document No. 72,
Shandong Chenming Panels Co., Ltd.（山東晨鳴板材有限責任公司）, Qihe Chenming Panels Co., Ltd.（齊河晨鳴板材有
限公司）, Juancheng Chenming Panels Co., Ltd（鄄城晨鳴板材有限公司）and Heze Chenming Panels Co., Ltd.（菏澤晨
鳴板材有限責任公司）, all being subsidiaries of the Company and produce products that applied integrated use of resources,
are subject to an immediate VAT refund policy.68
V. Taxation (continued)
Other Taxes
Enterprise Income Tax
Income tax rates applicable to the Company and its subsidiaries
Hailaer Chenming Paper Co., Ltd.（海拉爾晨鳴紙業有限責任公司）, a subsidiary of the Company established in the Inner
Mongolia Autonomous Region and covered by the preferential tax policy for industries encouraged by the State Government,
enjoyed the preferential income tax rate of 15% from 2001 to 2010 pursuant to Guo Shui Fa (2002) Document No. 47 issued by
the State Administration of Taxation.
Pursuant to the Guo Xi Ban Zong [2001] Document No. 10 “Written Reply concerning the Application of the Preferential Tax
Policies on Development of the Western Region in Yanbian Korean Autonomous Prefecture “ issued by the Office of the
Leading Group for Western Region Development of the State Council(《國家稅西部開發辦關於延邊朝鮮自治州參照報行
國家西部大開發優惠政策的復函》)and Yanzhou local tax notice [2001] Document No. 99 “Letter confirming the
entitlement of吉林晨鳴亞松漿有限公司to preferential tax policy” issued by the local tax bureau of Yanbian Korean
Autonomous Prefecture(《延邊州地方稅務局關於吉林晨鳴亞松紙有限公司享受稅收優惠政策承諾的函》), Yanbian
Chenming Paper Co., Ltd.（延邊晨鳴紙業有限公司）, a subsidiary of the Company, is covered by the preferential tax policies
on development of the Western Region and thus enjoys preferential tax rate of 15% from 2001 to 2010.
Shandong Chenming Xinli Power Co., Ltd.（山東晨鳴新力熱電有限公司）, a subsidiary of the Company, was established in
2001 as a Sino-foreign joint venture and engaged in the business of electric power and thermal power generation. Pursuant to
Rule No. 73 of “Detailed Rules on the Implementation of the Income Tax Law of The People’s Republic of China for
Enterprises with Foreign Investment and Foreign Enterprises” (《中華人民共和國外商投資企業和外國企業所得稅法實施
細則》)and rules under the State Council’s Circular on Expanding Application Scope of Income Tax Preferential Treatment on
Enterprises with Foreign Investment Engaged in Energy or Traffic Infrastructure Projects(《國務院關於擴大外商投資企業
從事能源交通基礎設施項目稅收收優惠規定使用範圍的通知》) (Guo Fa [1999] No. 13), and Guo Shui Han [2002]
Document No. 1032 “Written Reply on issues regarding the application of preferential enterprise income tax rate to Shandong
Chenming Xinli Power Co., Ltd.” from the State Council(《國家稅務總局關於山東晨鳴新力熱電有限公司適用企業所得
稅率問題的批復》), Shandong Chenming Xinli Power Co., Ltd. is subject to income tax rate of 15%. Pursuant to Guo Fa
[2007] Document No. 39 “Circular on Transitional Preferential Enterprise Income Tax Policy” issued by the State Council( 《國
務院關於實施企業所得稅過渡優惠政策的通知》), the subsidiary was subject to the income tax rate of 20% in 2009.69
V. Taxation (continued)
Other Taxes (continued)
Enterprise Income Tax (continued)
Income tax rates applicable to the Company and its subsidiaries (continued)
Wuhan Chenming Hanyang Paper Co., Ltd.（武漢晨鳴漢陽紙業股份有限公司）, a subsidiary of the Company, was
transformed into an EFI in April 2005. Pursuant to the Income Tax Law of The People’s Republic of China for Enterprises with
Foreign Investment and Foreign Enterprises and its implementation rules, and as approved by State Taxation Administration of
Economic and Technological Development Zone of Wuhan City, the income tax for 2007 was reduced in half. Pursuant to Guo
Fa [2007] Document No. 39 “Circular on Transitional Preferential Enterprise Income Tax Policy” issued by the State Council
(《國務院關於實施企業所得稅過渡優惠政策的通知》), the subsidiary was subject to income tax rate of 10% in 2009.
Jiangxi Chenming Paper Co., Ltd.（江西晨鳴紙業有限責任有限公司）, a subsidiary of the Company, was transformed into
an EFI in 2004. It engaged in production with a period of operation of more than 10 years as a foreign-investment enterprise.
2009 was the third year since it started to make profits. Pursuant to Guo Fa [2007] Document No. 39 “Circular on Transitional
Preferential Enterprise Income Tax Policy” issued by the State Council(《國務院關於實施企業所得稅過渡優惠政策的通
知》), the subsidiary was subject to tax rate of 12.5% this year.
Except for the above preferential enterprise income tax policies, the Company and its remaining subsidiaries are subject to
enterprise income tax rate of 25% in the reporting period.
Crediting Payment on Purchase of Domestically-Made Equipment as Investments
Pursuant to the Circular on Several Issues concerning Crediting Payment on Purchase of Domestically-Made Equipment as
Investments against Enterprise Income Tax by Foreign-invested Enterprises and Foreign Enterprises(《關於外商投資企業和
外商企業購買國產設備投資抵免企業所得稅有關問題的通知》)issued by the Ministry of Finance and the State
Administration of Taxation (Cai Shui [2000] No. 49) and the Provisional Measures concerning Crediting Payment on Purchase
of Technologically Improved Domestically-Made Equipment as Investments against Enterprise Income Tax(《技術改造國產
設備投資抵免企業所得稅暫行辦法》) (Cai Shui Zi [1999] No. 290), the 40 percent of the Group’s payments on
domestically-made equipment is creditable against the increased amount in its enterprise income taxes in the year of purchase
over that of the year before. The allowable tax credit of an enterprise shall not exceed its newly increased enterprise income tax
for the year of purchase over that of the year before. If the amount of newly increased enterprise income tax is not sufficient for
tax credit, the remaining part of the investment which exceeds the tax credit shall be refundable against the newly increased tax
of the next year over that of the year before the year of purchase. However, the period for continuous tax credit shall not exceed
five years.70
V. Taxation (continued)
Other Taxes (continued)
Enterprise Income Tax (continued)
Income tax rates applicable to the Company and its subsidiaries (continued)
Pursuant to Guo Shui Fa [2008] Document No. 52 “Circular on Policy Question about Postponement to Implement to Set Off
Enterprise Income Tax with Investment To Acquire Domestic Equipment by Enterprise” issued by State General Tax
Bureau(《關於停止執行企業購買國產設備投資抵免企業所得稅政策問題的通知》), postponement to implement to the
policy to set off enterprise income tax with investment to acquire domestic equipment by an enterprise has been carried out
since 1 January 2008. Income tax credits in respect of investments in domestic-manufactured equipment as approved in prior
years will continue to be credited within the extended period.
Business tax
Business tax is calculated and paid at 5% of the maintenance fee income and interest income, and at 3% of transportation fee
income.
Urban maintenance and construction tax and educational surcharges
The Company and certain of its subsidiaries, including Wuhan Chenming Hanyang Paper Co., Ltd., Shandong Chenming Xinli
Power Co., Ltd., Jiangxi Chenming Paper Co., Ltd., and Jilin Chenming Paper Co., Ltd. are EFIs, and therefore are exempted
from urban maintenance and construction tax and education surcharges. As for Shandong Chenming Paper Group Qihe
Paperboard Co., Ltd., urban maintenance and construction tax and education surcharges are calculated and paid at 5% and 3%,
respectively, on the total amount of VAT payable and business tax payable; while that for other subsidiaries of the Company
are calculated and paid at 7% and 3%, respectively, on the total amount of VAT payable and business tax payable.
Individual income tax
Individual income tax payable by the Group’s employees is withheld and paid by the Group.
Property tax and land use tax
Property tax is levied based on 70% of the original cost of the building properties of the Group at the tax rate of 1.2%. Land use
tax is calculated based on the actual area of land used by the Group and is levied in accordance with the stipulated tax rate.71
VI. The scope of the consolidated financial statements and controlling subsidiaries
The subsidiaries of the Company were established in the purpose of investment:
Actual investment
Registered by the Group Aggregate Aggregate
capital at the end of shareholding voting
Organization Legal Place of (in RMB ten the year (in RMB of the rights held by
Name Enterprise type code representative incorporation Principal activities thousand) ten thousand) Group (%) the Group (%)
武漢晨鳴漢陽紙業 Sino-foreign 27189235-4 譚道成 Wuhan City Manufacture and sales of paper 21,136 20,283 50.93 50.93
股份有限公司 joint venture products, the materials of
(Wuhan Chenming Hanyang manufacture of paper
Paper Holdings Co., Ltd.) and machinery
山東晨鳴紙業集團 Limited liability 72074277-4 刑方同 Qihe, Shandong Manufacture, processing 37,620 37,620 100 100
齊河皮紙有限公司 company and sales of paperboard
(Shandong Chenming and packaging paper
Paper Group Qihe
Paperboard Co., Ltd.)x
山東晨鳴熱電股份有限公司 Limited liability 70620711-8 孫洪吉 Shouguang, Manufacture and supply 9,955 15,781 86.71 86.71
(Shandong Chenming Power company Shandong of electricity and heat
Supply Holdings Co., Ltd.)
延邊晨鳴紙業有限責任公司 Limited liability 72958840-0 桑景高 Yanji, Jilin Mucilage glue fiber pulp, 8,163.3 4,009 76.73 76.73
(Yanbian Chenming company pulp and machine-made paper
Paper Co., Ltd.)
江西晨鳴紙業有限責任公司 Sino-foreign 73925671-7 譚道成 Nanchang city Production and sales of high-grade 172,00 69,755 51 51
(Jiangxi Chenming joint venture paper, paperboard (ex. newsprint) ΠU¨§Π
Paper Co., Ltd.) and homemade pulp
壽光市晨鳴天園林業有限公司 Limited liability 70130836-4 李德江 Shouguang, Development, nurture of fast 1,059 720 68 68
(Shouguang Chenming Tianyuan company Shandong growth poplar, forest,
Arboriculture Co., Ltd.) vegetable and fruit
海拉爾晨鳴紙業有限責任公司 Limited liability 42203935-3 高子偉 Hailare City Sales and processing; 1,600 1,200 75 75
(Hailaer Chenming company sales of machine-made
Paper Co., Ltd.) paper and pulp paper72
VI. The scope of the consolidated financial statements and controlling subsidiaries (continued)
Actual investment
Registered by the Group Aggregate Aggregate
capital at the end of shareholding voting
Organization Legal Place of (in RMB ten the year (in RMB of the rights held by
Name Enterprise type code representative incorporation Principal activities thousand) ten thousand) Group (%) the Group (%)
赤壁晨鳴紙業有限公司 Limited liability 42203935-3 陳建明 Chibi, Hubei Production, processing, sales and 17,742 3,548 51 51
(Chibi Chenming Paper Company of pulp and paper products;
Co., Ltd.) land transport
武漢晨鳴乾能熱電有限公司 Limited liability 72579372-2 張利平 Wuhan City Generation and sales 8,824 4,500 51 51
(Wuhan Chenming Qianneng Company of electricity and heat
Electric Power Co., Ltd.)
武漢晨建新型牆體材料有限公司 Limited liability 74475404-0 呂學峰 Wuhan City Production, operation and sales of 1,000 510 51 51
(Wuhan Chenjian New-style Company aerated fly ash concrete blocks
Wall Materials Co., ltd.)
山東晨鳴新力熱電有限公司 Sino-foreign 72073121-5 孫洪吉 Shouguang, Generation and supply of 1,180萬美元 7,239 51 51
(Shandong Chenming Xinli joint venture Shandong electricity and heat
Power Co., Ltd.)
壽光市晨鳴水泥有限公司 Limited liability 73720178-X 孫洪吉 Shouguang, Utilization of ash in the production 700 700 100 100
(Shouguang Chenming company Shandong of cement and sales of cement
Cement Co., Ltd.)
山東晨鳴板材有限責任公司 Limited liability 73816170-8 劉樹森 Shouguang, Production, processing and sales 3,000 3,000 100 100
(Shandong Chenming Company Shandong of the decorative board of the layer
Panels Co., Ltd.) of laminated board, wooden products,
laminated board, fortified wooden
floorboard and impregnated paper
壽光晨鳴地板有限責任公司 Limited liability 76366212-5 劉樹森 Shouguang, Production, processing and sales 50 50 100 100
(Shouguang Chenming Company Shandong of fortified wooden floorboard
Floor Board Co., Ltd.) and impregnated paper73
VI. The scope of the consolidated financial statements and controlling subsidiaries (continued)
Actual investment
Registered by the Group Aggregate Aggregate
capital at the end of shareholding voting
Organization Legal Place of (in RMB ten the year (in RMB of the rights held by
Name Enterprise type code representative incorporation Principal activities thousand) ten thousand) Group (%) the Group (%)
齊河晨鳴板材有限公司 Limited liability 76001404-2 劉樹森 Qihe, Shandong Production, processing and sales 4,082 4,082 100 100
(Qihe Chenming Panels Company of high-density (medium-density)
Co., Ltd.) fiberboard, decorative panel,
melamine impregnated paper
and composite floor
菏澤晨鳴板材有限責任公司 Limited liability 75827615-8 劉樹森 Heze, Shandong Production, processing and 3,000 3,000 67 67
(Heze Chenming Panels Company sales of high-density (medium-density)
Co., Ltd.) fiberboard, decorative panel,
melamine impregnated paper
and composite floor
陽江晨鳴林業發展有限公司 Limited liability 78487434-6 尹同遠 Yangjiang, Plantation and development of 100 100 100 100
(Yangjiang Chenming Company Guangdong forest, and technology
Arboriculture Co., Ltd.) consultation of forestry
湛江晨鳴林業發展有限公司 Limited liability 7898807-5 王在國 Zhanjiang, Plantation of forest, nutrition and sales 100 100 100 100
(Zhanjiang Chenming company Guandong of seedling, processing and sales
Arboriculture Co., Ltd.) of timber and processing and
sales of by-products of timber
吉林晨鳴紙業有限責任公司 Limited liability 7829556-0 王在國 Jilin City, Processing and sales of machine- 150,000 150,135 100 100
(Jilin Chenming Paper Company Jilin province made paper, paperboard, paper
Co., Ltd.) product, paper pulp, machinery
and equipment of manufacture of paper
鄄城晨鳴板材有限公司 Limited liability 7782435-X 候煥才 Juancheng, Production and sales of particle board, 1,500 1,500 100 100
(Juancheng Chenming company Shandong decorative particle board
Panels Co., Ltd.) and melamine impregnated paper
山東御景大酒店有限公司 Foreign 97529857-8 劉樹森 Shouguang, Restaurant and beverage services 1,391萬美元 8,050 70 70
(Shandong Grand View investment Shandong
Hotel Co., Ltd.) enterprise74
VI. The scope of the consolidated financial statements and controlling subsidiaries (continued)
Actual investment
Registered by the Group Aggregate Aggregate
capital at the end of shareholding voting
Organization Legal Place of (in RMB ten the year (in RMB of the rights held by
Name Enterprise type code representative incorporation Principal activities thousand) ten thousand) Group (%) the Group (%)
湛江晨鳴漿紙有限公司 Limited liability 77527884-1 馮新泉 Zhanjiang, Improvement of plant fostering, 50,000 50,000 100 100
(Zhanjiang Chenming Company Guangdong true planting and soil, research of
Paper Pulp Co., Ltd.) forestry, manufacture, production,
processing and sales of paper pulp
晨鳴（香港）有限公司 Limited liability 37349273 魏克兩 Hong Kong, Export and import trade of 10萬美元 78 100 100
(Chenming (HK) Limited) Company 00011088 China paper products and market research
壽光晨鳴現代物流有限公司 Limited liability 66015223-7 陳洪國 Shouguang, Transportation of goods 1,000 1,000 100 100
(Shouguang Chenming Company Shandong
Modern Logistic Co., Ltd.)
壽光市潤生廢紙回收有限責任公司 Limited liability 77316557-9 陳洪國 Shouguang, Purchase and sales of waste 100 100 100 100
(Shouguang City Run Sheng company Shandong and obsolete materials
Wasted Paper Recycle
Co., Ltd.)
壽光晨鳴美術紙有限公司 Foreign 79867677-0 尹同遠 Shouguang, Production of art paper, and sales 2,000萬美元 11,362 75 75
(Shouguang Chenming investment Shandong of the product which
Art Paper Co., Ltd.) enterprise produced by the Company
齊河晨鳴廢舊物資收購有限公司 Limited liability 75825591-2 李峰 Qihe, Shandong Purchase and sales of 50 50 98 98
(Qihe Chenming Waste Company waste and obsolete materials
Collection Co., Ltd.)
吉林晨鳴廢舊物資回收有限公司 Limited liability 77872731-5 張邦吉 Jilin Purchase and sales of 100 100 100 100
(Jilin Chenming Waste Company waste and obsolete materials
Collection Co., Ltd.)
吉林市晨鳴機械製造有限公司 Limited liability 66012410-5 張春林 Jilin Processing of machinery, manufacture, 60 60 100 100
(Jilin Chenming Machinery Company installation and repair of the
Manufacturing Co., Ltd.) equipment of machinery75
VI. The scope of the consolidated financial statements and controlling subsidiaries (continued)
Actual investment
Registered by the Group Aggregate Aggregate
capital at the end of shareholding voting
Organization Legal Place of (in RMB ten the year (in RMB of the rights held by
Name Enterprise type code representative incorporation Principal activities thousand) ten thousand) Group (%) the Group (%)
南昌晨鳴林業發展有限公司 Limited liability 66204306-9 張國英 Nanchang, Processing and sales of wood 1,000 1,000 100 100
(Nanchang Chenming Company Jiangxi
Arboriculture Co., Ltd.)
富裕晨鳴紙業有限責任公司 Limited liability 66389298-6 劉春山 Fuyu County, Production and sales of 20,800 20,800 100 100
(Fuyu Chenming Paper Co., Ltd.) Company Qiqihar City machine-made paper and paperboard
無錫松嶺紙業有限公司 Limited liability 76243145-6 劉春山 Wuxi City Sales, cutting and processing of paper 501 — 100 100
(Wuxi Song Ling Paper Co., Ltd.) Company
黃崗晨鳴林業發展有限責任公司 Limited liability 67036898-X 王在國 Huanggang city Plantation, processing 1,000 1,000 100 100
(Huanggang Chenming Company and sales of forest
Arboriculture Co., Ltd.)
黃崗晨鳴漿紙有限公司 Limited liability 67976586-9 肖翔 Huanggang city, Operation and acquisition of forest; 2,000 2,000 100 100
(Huanggang Chenming Company Hubei establishment of paper projects
Paper Co., Ltd.)
咸甯晨鳴林業發展有限責任公司 Limited liability 67975036-8 王在國 Xianning, Hubei Plantation, processing 1,000 1,000 100 100
(Xianning Chenming Arboriculture Company and sales of forest
development Co., Ltd.
壽光市新源煤炭有限公司 Limited liability 78077560-7 丁步勳 Xianning, Hubei Processing and sales of metal 155 170 100 100
company products, packaging
products and furniture76
VI. The scope of the consolidated financial statements and controlling subsidiaries (continued)
Actual investment
Registered by the Group Aggregate Aggregate
capital at the end of shareholding voting
Organization Legal Place of (in RMB ten the year (in RMB of the rights held by
Name Enterprise type code representative incorporation Principal activities thousand) ten thousand) Group (%) the Group (%)
壽光市新源煤炭有限公司 Limited liability 86570424-2 鞠洪亮 Shouguang, Retails of coals, petrol and diesels oil 200 120 100 100
(Shouguang Xinyuan Company Shandong
Coal Co., Ltd.)
壽光維遠物流有限公司 Limited liability 78079463-X 郝利民 Shouguang, Transportation of general goods 393 400 100 100
(Shouguang Wei Yuan Company Shandong and hazardous goods
Logistics Company Limited)
壽光美倫紙業有限公司 Limited liability 69064934-0 尹同遠 Shouguang, Producing, processing and 2,000 2,000 100 100
(Shouguang Meilun company Shandong sales of paper products
Paper Co. Ltd.* )77
VI. The scope of the consolidated financial statements and controlling subsidiaries (continued)
Note 1: Newly acquired subsidiaries which were consolidated in this year:
壽光市新源煤炭有限公司 (Shougang Xinyuan Coal Co., Ltd.)
壽光晨鳴現代物流有限公司 (Shouguang Chenming Modern Logistic Co., Ltd.), a controlling subsidiary of the Company,
entered into a share transfer agreement with the shareholder of 壽光市新源煤炭有限公司 (Shougang Xinyuan Coal Co., Ltd.),
according to which, a 50% shareholding in 壽光市新源煤炭有限公司 (Shougang Xinyuan Coal Co., Ltd.) was acquired from
its original shareholder. 壽光維遠物流有限公司 (Shouguang Wei Yuan Logistics Company Limited), a wholly-owned
subsidiary of 壽光晨鳴現代物流有限公司 (Shouguang Chenming Modern Logistic Co., Ltd.), owns a 50% shareholding in 壽
光市新源煤炭有限公司 (Shougang Xinyuan Coal Co., Ltd.). 壽光晨鳴現代物流有限公司 (Shouguang Chenming Modern
Logistic Co., Ltd.), a controlling subsidiary of the Company, owns in aggregate a 100% shareholdingin 壽光市新源煤炭有限公
司 (Shougang Xinyuan Coal Co., Ltd.).
壽光虹宜包裝裝飾有限公司
壽光晨鳴現代物流有限公司 (Shouguang Chenming Modern Logistic Co., Ltd.), a controlling subsidiary of the Company,
entered into a share transfer agreement with the shareholder of 壽光虹宜包裝裝飾有限公司, according to which, a 50%
shareholding in 壽光虹宜包裝裝飾有限公司 was acquired from its original shareholder.
壽光維遠物流有限公司 (Shouguang Wei Yuan Logistics Company Limited)
壽光晨鳴現代物流有限公司 (Shouguang Chenming Modern Logistic Co., Ltd.), a controlling subsidiary of the Company,
entered into a share transfer agreement with the shareholder of 壽光維遠物流有限公司 (Shouguang Wei Yuan Logistics
Company Limited), according to which, a 100% shareholding in 壽光維遠物流有限公司 (Shouguang Wei Yuan Logistics
Company Limited) was acquired from its original shareholder.
壽光美倫紙業有限公司 (Shouguang Meilun Paper Co. Ltd.* )
The Company contributed capital to set up 壽光美倫紙業有限公司 (Shouguang Meilun Paper Co. Ltd.*) on 30 June 2009. It is
wholly owned by Shandong Chenming Paper Holdings Limited with a registered capital of RMB20 million.78
VII. Unaudited Financial Statements and Notes thereto Prepared in
Accordance with Accounting Standards for Business Enterprises
VII. Notes to the financial statements
1. Bank balances and cash
The Group
2009.6.30 2008.12.31
Foreign Foreign
currency Exchange currency Exchange
amount Rate RMB amount Rate RMB
Cash
RMB — — 1,965,293.12 — — 1,341,632.42
USD — — — — — —
Cash in Bank
RMB — — 2,373,479,082.72 — — 2,530,753,538.10
HKD 1,127.39 0.8836 996.14 595,685.04 0.8819 525,334.64
USD 15,511,276.12 6.8319 105,971,513.34 22,155,641.87 6.8346 151,424,949.93
EURO 590,252.31 9.6408 5,690,504.48 365,845.82 9.6590 3,533,704.76
Other bank
balances
and cash
RMB — — 1,505,780,066.90 — — 162,711,256.24
USD 10,653.02 6.8319 72,780.36 457,629.12 6.8346 3,127,711.98
EURO 11.47 9.6408 110.58 — — —
Total 3,992,960,347.64 2,853,418,128.07
As at 30 June 2009, other bank balances and cash of the Group included bank acceptance deposit of
RMB1,441,810,477.00, and letter of credit deposit of RMB64,042,480.84.79
VII. Notes to the financial statements (continued)
1. Bank balances and cash (continued)
The Company
2009.6.30 2008.12.31
Foreign Foreign
currency Exchange currency Exchange
amount Rate RMB amount Rate RMB
Cash
RMB — — 162,160.93 — — 30,527.86
USD — — — — — —
Cash in Bank
RMB — — 2,096,129,724.81 — — 2,060,669,780.07
HKD 777.39 0.8815 685.29 595,685.04 0.8819 525,334.64
USD 2,959,217.25 6.8319 20,217,076.33 2,747,651.12 6.8346 18,779,096.34
EURO 223,796.01 9.6408 2,157,572.57 92.71 9.659 895.49
Other bank
balances
and cash
RMB — — 1,378,028,522.72 — — 62,434,105.11
Total 3,496,695,742.65 2,142,439,739.51
As at 30 June 2009, other bank balances and cash of the Company included bank acceptance deposit of
RMB1,378,028,522.72.
2. Financial assets held for trading
The Group
2009.6.30 2008.12.31
RMB RMB
Financial assets held for trading 12,200,000.00 —80
VII. Notes to the financial statements (continued)
3. Bills receivable
The Group
2009.6.30 2008.12.31
RMB RMB
Bank acceptance 2,221,866,092.84 974,009,788.24
As at 30 June 2009, the bank acceptance of the Group (including bank acceptance discounted with recourse) amounted to
RMB1,242,844,732.09 (31 December 2008: RMB401,110,381.77).
The Company
2009.6.30 2008.12.31
RMB RMB
Bank acceptance 1,464,935,031.34 465,681,067.32
As at 30 June 2009, the bank acceptance of the Company (including bank acceptance discounted with recourse) amounted
to RMB832,095,438.87 (31 December 2008: RMB 217,370,008.75)
As at 30 June 2009, the Group and the Company had no outstanding amount within the notes receivable due from
shareholders holding 5% or more (including 5%) in the shares.81
VII. Notes to the financial statements (continued)
4. Accounts receivable
The Group
Aging analysis of accounts receivable is as follows:
2009.6.30 2008.12.31
Bad debts Bad debts
Amount Ratio provision Book value Amount Ratio provision Book value
RMB (%) RMB RMB RMB (%) RMB RMB
Within 1 year 2,088,298,210.31 95.60 (129,641,441.07 ) 1,958,656,769.24 1,829,658,612.65 95.31 (118,450,388.95 ) 1,711,208,223.70
1 to 2 years 38,786,781.23 1.78 (11,218,104.12 ) 27,568,677.11 37,381,104.32 1.95 (10,075,170.73 ) 27,305,933.59
2 to 3 years 6,014,906.33 0.28 (1,226,090.89 ) 4,788,815.44 19,485,384.07 1.02 (5,590,192.19 ) 13,895,191.88
3 to 4 years 21,704,932.34 0.99 (21,704,932.34 ) — 6,219,182.05 0.32 (6,219,182.05 ) —
Over 4 years 29,426,166.24 1.35 (29,426,166.24 ) — 26,893,037.29 1.40 (26,893,037.29 ) —
Total 2,184,230,996.45 100.00 (193,216,734.66 ) 1,991,014,261.79 1,919,637,320.38 100.00 (167,227,971.21 ) 1,752,409,349.17
The breakdown of accounts receivable according to customer’s classifications is as follows:
2009.6.30 2008.12.31
Bad debts Bad debts
Amount Ratio provision Book value Amount Ratio provision Book value
RMB (%) RMB RMB RMB (%) RMB RMB
Single item with
significant amount
of money 1,891,093,204.50 86.58 (149,025,995.86 ) 1,742,067,208.64 1,624,743,533.96 84.64 (57,263,087.60 ) 1,567,480,446.36
Single item without
significant amount
of money but
considered
to be greater risks
after arrived at
by credit risk
characteristics 34,482,698.74 1.58 (30,886,177.85 ) 3,596,520.89 35,390,449.48 1.84 (30,409,266.30 ) 4,981,183.18
Other items without
significant amount
of money 258,655,093.21 11.84 (13,304,560.95 ) 245,350,532.26 259,503,336.94 13.52 (79,555,617.31 ) 179,947,719.63
Total 2,184,230,996.45 100.00 (193,216,734.66 ) 1,991,014,261.79 1,919,637,320.38 100.00 (167,227,971.21 ) 1,752,409,349.17
For the movements of bad debts provision for accounts receivable, see Note VII.19.82
VII. Notes to the financial statements (continued)
4. Accounts receivable (continued)
The Group (continued)
Top five accounts receivable are as follows:
Top five balances of Percentage of the
accounts receivable total balance of accounts receivable
RMB %
220,668,536.02 10.10
At the end of the reporting period, top five balances of accounts receivable of the Group were related to sales of paper
products.
The Company
Aging analysis of accounts receivable is as follows:
2009.6.30 2008.12.31
Bad debts Bad debts
Amount Ratio provision Book value Amount Ratio provision Book value
RMB (%) RMB RMB RMB (%) RMB RMB
Within 1 year 2,535,702,997.37 97.07 (132,625,382.81 ) 2,403,077,614.56 2,028,288,765.78 97.90 (113,715,919.27 ) 1,914,572,846.51
1 to 2 years 59,781,875.25 2.29 (2,430,706.75 ) 57,351,168.50 28,865,325.57 1.39 (9,455,622.85 ) 19,409,702.72
2 to 3 years 2,166,863.11 0.08 (433,372.63 ) 1,733,490.48 4,122,204.54 0.20 (824,440.91 ) 3,297,763.63
3 to 4 years 4,239,807.67 0.16 (4,239,807.67 ) — 329,884.43 0.02 (329,884.43 ) )—
Over 4 years 10,421,030.61 0.40 (10,421,030.61 ) — 10,275,982.13 0.49 (10,275,982.13 ) —
Total 2,612,312,574.01 100.00 (150,150,300.47 ) 2,462,162,273.54 2,071,882,162.45 100.00 (134,601,849.59 ) 1,937,280,312.8683
VII. Notes to the financial statements (continued)
4. Accounts receivable (continued)
The Company (continued)
The breakdown of accounts receivable according to customer’s classifications is as follows:
2009.6.30 2008.12.31
Bad debts Bad debts
Amount Ratio provision Book value Amount Ratio provision Book value
RMB (%) RMB RMB RMB (%) RMB RMB
Single item with
significant amount
of money 2,384,833,361.32 91.29 (131,861,600.35 ) 2,252,971,760.97 1,851,137,454.18 89.34 (50,850,881.28 ) 1,800,286,572.90
Single item without
significant amount
of money but
considered
to be greater risks
after arrived at
by credit risk
characteristics 8,887,696.99 0.34 (8,331,835.09 ) 555,861.90 8,260,094.93 0.40 (6,855,682.91 ) 1,404,412.02
Other items without
significant amount
of money 218,591,515.70 8.37 (9,956,865.03 ) 208,634,650.67 212,484,613.34 10.26 (76,895,285.40 ) 135,589,327.94
Total 2,612,312,574.01 100.00 (150,150,300.47 ) 2,462,162,273.54 2,071,882,162.45 100.00 (134,601,849.59 ) 1,937,280,312.86
Top five accounts receivable are as follows:
Top five balances of Percentage of the
accounts receivable total balance of accounts receivable
RMB %
846,934,170.79 32.42
At the end of the reporting period, top five balances of accounts receivable of the Company were related to sales of paper
products and sales of materials by the Company.
The Group and the Company had no outstanding amount within the accounts receivable due from shareholders holding
5% or more (including 5%) in the shares.84
VII. Notes to the financial statements (continued)
5. Advance to suppliers
The Group
Aging Analysis of the advance to suppliers is as follows:
2009.6.30 2008.12.31
Amounts Ratio Amounts Ratio
RMB (%) RMB (%)
Within 1 year 555,059,943.53 84.38 422,828,184.88 91.42
1 to 2 years 102,734,417.33 15.62 39,698,153.99 8.58
Total 657,794,360.86 100.00 462,526,338.87 100.00
The breakdown of advance to suppliers according to customer’s classifications is as follows:
2009.6.30 2008.12.31
Amounts Ratio Amounts Ratio
RMB (%) RMB (%)
Single item with significant
amount of money 471,836,423.14 71.73 354,789,557.91 76.71
Other items without significant
amount of money 185,957,937.72 28.27 107,736,780.96 23.29
Total 657,794,360.86 100.00 462,526,338.87 100.0085
VII. Notes to the financial statements (continued)
5. Advance to suppliers (continued)
The Company
Aging analysis of the advance to suppliers is as follows:
2009.6.30 2008.12.31
Amounts Ratio Amounts Ratio
RMB (%) RMB (%)
Within 1 year 503,796,897.24 92.94 414,158,895.27 94.39
1 to 2 years 38,276,979.62 7.06 24,600,467.21 5.61
Total 542,073,876.86 100.00 438,759,362.48 100.00
The breakdown of advance to suppliers according to customer’s classifications is as follows:
2009.6.30 2008.12.31
Amounts Ratio Amounts Ratio
RMB (%) RMB (%)
Single item with significant
amount of money 516,439,519.42 95.27 408,602,400.53 93.13
Other items without significant
amount of money 25,634,357.44 4.73 30,156,961.95 6.87
Total 542,073,876.86 100.00 438,759,362.48 100.00
At the end of the reporting period, the Group and the Company had no outstanding amount within the advance to
suppliers due from shareholders holding 5% or more (including 5%) in the shares.86
VII. Notes to the financial statements (continued)
6. Other receivables
The Group
Aging analysis of other receivables is as follows:
2009.6.30 2008.12.31
Bad debts Bad debts
Amount Ratio provision Book value Amount Ratio provision Book value
RMB (%) RMB RMB RMB (%) RMB RMB
Within 1 year 76,931,184.89 43.74 (3,053,434.06 ) 73,877,750.83 93,786,094.02 50.04 (3,872,487.84 ) 89,913,606.18
1 to 2 years 51,349,263.04 29.20 (4,747,200.71 ) 46,602,062.33 44,225,959.55 23.60 (3,729,817.78 ) 40,496,141.77
2 to 3 years 8,466,324.58 4.81 (1,905,096.31 ) 6,561,228.27 5,891,292.30 3.14 (411,427.32 ) 5,479,864.98
3 to 4 years 9,900,841.22 5.63 (9,900,841.22 ) — 16,139,721.78 8.61 (16,139,721.78 ) —
Over 4 years 29,222,151.29 16.62 (29,222,151.29 ) — 27,392,512.33 14.61 (27,392,512.33 ) —
Total 175,869,765.02 100.00 (48,828,723.59 ) 127,041,041.43 187,435,579.98 100.00 (51,545,967.05 ) 135,889,612.93
The breakdown of other receivables according to customer’s classifications is as follows:
2009.6.30 2008.12.31
Bad debts Bad debts
Amount Ratio provision Book value Amount Ratio provision Book value
RMB (%) RMB RMB RMB (%) RMB RMB
Single item with
significant
amount
of money 64,547,424.78 36.70 (26,143,500.39 ) 38,403,924.39 103,576,084.49 55.26 (26,076,824.29 ) 77,499,260.20
Single item without
significant amount of
money but considered
to be greater risks
after arrived at
by credit risk
characteristics 19,895,703.63 11.31 (16,873,908.62 ) 3,021,795.01 32,720,842.25 17.46 (18,238,351.44 ) 14,482,490.81
Other items without
significant amount
of money 91,426,636.61 51.99 (5,811,314.58 ) 85,615,322.03 51,138,653.24 27.28 (7,230,791.32 ) 43,907,861.92
Total 175,869,765.02 100.00 (48,828,723.59 ) 127,041,041.43 187,435,579.98 100.00 (51,545,967.05 ) 135,889,612.9387
VII. Notes to the financial statements (continued)
6. Other receivables (continued)
The Group (continued)
For the movements of the bad debts provision for other receivables, see notes VII.19.
Top five other receivables is as follows:
Top five balances of Percentage of the
accounts receivable total balance of accounts receivable
RMB %
58,457,144.39 33.24
At the end of the reporting period, top five other receivables to the Group included RMB 28,506,394.41 of prepaid tax to
customs, and advance receivables.
The Company
Aging analysis of other receivables is as follows:
2009.6.30 2008.12.31
Bad debts Bad debts
Amount Ratio provision Book value Amount Ratio provision Book value
RMB (%) RMB RMB RMB (%) RMB RMB
Within 1 year 1,275,799,190.39 95.49 (2,601,588.84 ) 1,273,197,601.55 903.553,335.31 94.58 (3,538,709.30 ) 900,014,626.01
1 to 2 years 47,082,500.32 3.53 (3,716,407.10 ) 43,366,093.22 37,815,787.23 3.96 (3,577,895.16 ) 34,237,892.07
2 to 3 years 5,117,042.81 0.38 (1,725,954.12 ) 3,391,088.69 2,474,881.24 0.26 (258,884.60 ) 2,215,996.64
3 to 4 years 1,189,614.10 0.09 (1,189,614.10 ) — 2,591,793.46 0.27 (2,591,793.46 ) —
Over 4 years 6,817,664.17 0.51 (6,817,664.17 ) — 8,933,317.48 0.93 (8,933,317.48 ) —
Total 1,336,006,011.79 100.00 (16,051,228.33 ) 1,319,954,783.46 955,369,114.72 100.00 (18,900,600.00 ) 936,468,514.7288
VII. Notes to the financial statements (continued)
6. Other receivables (continued)
The Company (continued)
The breakdown of other receivables according to customer’s classifications is as follows:
2009.6.30 2008.12.31
Bad debts Bad debts
Amount Ratio provision Book value Amount Ratio provision Book value
RMB (%) RMB RMB RMB (%) RMB RMB
Single item with
significant amount
of money 1,260,304,669.72 94.33 (3,569,950.39 ) 1,256,734,719.33 903,048,155.67 94.52 (6,401,477.54 ) 896,646,678.13
Single item without
significant amount
of money but
considered
to be greater risks
after arrived at
by credit risk
characteristics 9,209,890.23 0.69 (7,323,368.87 ) 1,886,521.36 12,054,200.78 1.26 (5,680,014.20 ) 6,374,186.58
Other items without
significant amount
of money 66,491,451.84 4.98 (5,157,909.07 ) 61,333,542.77 40,266,758.27 4.22 (6,819,108.26 ) 33,447,650.01
Total 1,336,006,011.79 100.00 (16,051,228.33 ) 1,319,954,783.46 955,369,114.72 100.00 (18,900,600.00 ) 936,468,514.72
Top five other receivables is as follows:
Top five balances of Percentage of the
accounts receivable total balance of accounts receivable
RMB %
1,163,947,621.28 87.12
At the end of the reporting period, all of the top five other receivables to the Company represented short-term loans due
from subsidiaries of the Company.
At the end of the reporting period, the Group and the Company had no outstanding amount within the other receivables
due from shareholders holding 5% or more (including 5%) in the shares.89
VII. Notes to the financial statements (continued)
7. Inventories and provision of inventories
The Group
2009.6.30 2008.12.31
Provision of Provision of
Amounts impairment Book value Amounts impairment Book value
RMB RMB RMB RMB RMB RMB
Raw materials 1,702,257,637.78 — 1,702,257,637.78 1,617,795,107.45 (38,053,661.45 ) 1,579,741,446.00
Goods-in stock 1,224,361,773.88 (18,962,019.55 ) 1,205,399,754.33 1,837,434,737.58 (92,580,212.31 ) 1,744,854,525.27
Work-inprogress
72,608,981.56 — 72,608,981.56 77,369,465.81 (4,172,506.70 ) 73,196,959.11
Total 2,999,228,393.22 (18,962,019.55 ) 2,980,266,373.67 3,532,599,310.84 (134,806,380.46 ) 3,397,792,930.38
Provision of inventories is as follows:
Addition Reversal
2008.12.31 for the year for the year 2009.6.30
RMB RMB RMB RMB
During the year
Raw materials 38,053,661.45 — (38,053,661.45) —
Goods-in stock 92,580,212.31 7,953,890.99 (81,572,083.75) 18,962,019.55
Work-in-progress 4,172,506.70 — (4,172,506.70) —
Total 134,806,380.46 7,953,890.99 (123,798,251.90) 18,962,019.5590
VII. Notes to the financial statements (continued)
7. Inventories and provision of inventories (continued)
The Company
2009.6.30 2008.12.31
Provision of Provision of
Amounts impairment Book value Amounts impairment Book value
RMB RMB RMB RMB RMB RMB
Raw materials 655,210,902.48 — 655,210,902.48 598,215,785.94 — 598,215,785.94
Goods-in stock 625,564,724.56 — 625,564,724.56 1,124,422,916.85 (46,500,597.16 ) 1,077,922,319.69
Work-inprogress
4,564,361.43 — 4,564,361.43 6,518,968.88 — 6,518,968.88
Total 1,285,339,988.47 — 1,285,339,988.47 1,729,157,671.67 (46,500,597.16 ) 1,682,657,074.51
Provision of inventories is as follows:
Addition Reversal
2008.12.31 for the year for the year 2009.6.30
RMB RMB RMB RMB
During the year 46,500,597.16 — (46,500,597.16) —
As at 30 June 2009, the Group and the Company had not pledged any inventories for any debts.
8. Entrust Loans
The Company
2009.6.30 2008.12.31
RMB RMB
Entrust loans made to subsidiaries
Due within a year 896,100,000.00 982,000,000.00
Due in a year later 870,000,000.00 965,000,000.00
Net value of entrusted loans 1,766,100,000.00 1,947,000,000.00
The Company entrusted banks to provide funds for its subsidiaries. The terms of above entrusted loan ranges from 1 to 10
years, and the interest rate ranges from 4.779% to 6.723%.91
VII. Notes to the financial statements (continued)
9. Other current assets
The Group
2009.6.30 2008.12.31
RMB RMB
Non-credit input tax amount in value added tax 102,553,529.86 124,905,083.61
Prepaid enterprise income tax 25,279,122.77 27,087,962.34
Total 127,832,652.63 151,993,045.95
The Company
2009.6.30 2008.12.31
RMB RMB
Non-credited input tax amount in value added tax 55,810,289.41 39,110,582.59
Prepaid enterprise income tax — 13,636,622.39
Total 55,810,289.41 52,747,204.9892
10. Long-term equity investments
The Group
(1) The details of long-term equity investments are as follow:
Equity
Initial Opening Additions Adjustments Cash bonus Other Closing
Name of investee companies investment balance for the year for the year for the year deductions balance
RMB RMB RMB RMB RMB RMB RMB
Equity method
阿爾諾維根斯晨鳴
特種紙有限公司
(Arjo Wiggins Chenming
Specialty Paper Co., Ltd.) 80,100,000.00 48,478,865.50 — (9,410,441.25 ) — — 39,068,424.25
壽光麗奔制紙有限公司
(Shougang Liben paper Making
Co., Ltd.) 19,550,000.00 18,343,441.71 — 5,504.47 — — 18,348,946.18
青州市晨鳴變性澱粉
有限責任公司 Qingzhou
Chenming Denaturation
Amylum Co., Ltd.) 540,000.00 900,000.00 — — — — 900,000.00
江西江報傳媒彩印有限公司 6,000,000.00 6,000,000.00 (126,783.34 ) 5,873,216.66
106,190,000.00 67,722,307.21 6,000,000.00 (9,531,720.12 ) — — 64,190,587.09
Cost method
濰坊創業投資有限公司 1,000,000.00 1,000,000.00 — — — — 1,000,000.00
泰山保險經紀有限公司 2,000,000.00 2,000,000.00 — — — — 2,000,000.00
山東紙業集團轂公司 200,000.00 200,000.00 — — — — 200,000.00
浙江省廣育報業印務有限公司 2,000,000.00 2,000,000.00 — — — — 2,000,000.00
濟南商友商務有限責任公司 350,000.00 350,000.00 — — — — 350,000.00
上海林嘉紙電子商務有限公司 1,400,000.00 1,400,000.00 — — — — 1,400,000.00
壽光彌河水務有限公司 20,000,000.00 20,000,000.00 — — — — 20,000,000.00
26,950,000.00 26,950,000.00 — — — — 26,950,000.00
Total 133,140,000.00 94,672,307.21 6,000,000.00 (9,531,720.12 ) — — 91,140,587.09
Less:provision for impairment (1,998,538.07 ) (1,998,538.07 )
Net amount of long-term
equity investments 92,673,769.14 89,142,049.0293
VII. Notes to the financial statements (continued)
10. Long-term equity investments (continued)
The Group (continued)
(1) (continued)
The movement of provision of impairment of long-term equity investments is as follows:
Retirements
Additions and disposals
Name of investee companies Opening balance for the period for the period Closing balance
RMB RMB RMB RMB
青州市晨鳴變性澱粉有限責任公司
(Qingzhou Chenming Denaturation
Amylum Co., Ltd.) 900,000.00 — — 900,000.00
山東紙業集團轂公司 200,000.00 — — 200,000.00
濟南商友商務有限責任公司 350,000.00 — — 350,000.00
濰坊創業投資有限公司 80,385.84 — — 80,385.84
上海林嘉紙電子商務有限公司 468,152.23 — — 468,152.23
Total 1,998,538.07 — — 1,998,538.07
(2) List of the associates and their financial information
Total
Percentage Percentage Total assets of Total liabilities operation income Total net profit
of the registed of the voting the investee of the investee of the investee of the investee
Registration Nature of capital of the rights of units at the units at the units at the units at the
Name of investee units place business Registered capital investee units investee units end of the year end of the year end of the year end of the year
RMB % % RMB RMB RMB RMB
阿爾諾維根斯晨鳴 Shangdong Manufacture 267,368,330.00 30 30 414,134,320.84 283,537,909.99 23,641,302.10 (31,368,137.49 )
特種紙有限公司
(Arjo Wiggins Chenming
Specialty Paper Co., Ltd.)
壽光麗奔制紙有限公司 Shangdong Manufacture 74,070,000.00 26.4 26.4 79,851,484.57 11,386,534.41 41,223,797.51 20,850.25
(Shouguang Liben Paper of paper
Making Co., Ltd.)
江西江報傳媒彩印有限公司 Jiangxi Sales 23,140,000.00 21.15 21.15 28,243,700.29 4,570,986.10 3,184,852.26 (977,998.84 )94
VII. Notes to the financial statements (continued)
10. Long-term equity investments (continued)
The Company
(1) The details of long-term equity investments are as follow:
Investment Investment
addition deduction Equity adjustment
Name of investee companies Initial investment Opening balance for the year for the year for the year Closing balance
RMB RMB RMB RMB RMB RMB
Investments made to subsidiaries
武漢晨鳴漢陽紙業股份有限公司
(Wuhan Chenming Hanyang Paper
Holdings Co., Ltd.) 202,824,716.34 202,824,716.34 — — — 202,824,716.34
山東晨鳴紙業集團齊河板紙有限公司
(Shangdong Chenming Paper Group
Qihe Paperboard Co., Ltd.) 376,200,000.00 376,200,000.00 — — — 376,200,000.00
山東晨鳴熱電股份有限公司
(Shangdong Chenming Power
Supply Holdings Co., Ltd.) 157,810,117.43 157,810,117.43 — — — 157,810,117.43
赤壁晨鳴紙業有限責任公司
(Chibi Chenming Paper Co., Ltd.) 26,270,460.90 26,270,460.90 — — — 26,270,460.90
延邊晨鳴紙業有限責任公司
(Yanbian Chenming Paper Co., Ltd.) 40,083,733.01 40,083,733.01 — — — 40,083,733.01
海拉爾晨鳴紙業有限公司
(Hailaer Chenming Paper Co., Ltd.) 12,000,000.00 12,000,000.00 — — — 12,000,000.00
江西晨鳴紙業有限責任公司
(Jiangxi Chenming Paper Co., Ltd.) 697,548,406.40 697,548,406.40 — — — 697,548,406.40
壽光市晨鳴天園林業有限公司
(Shouguang Chenming Tianyuan
Arboriculture Co., Ltd.) 7,199,000.00 7,199,000.00 — — — 7,199,000.00
吉林晨鳴紙業有限公司
(Jilin Chenming Paper Co., Ltd.) 1,501,350,000.00 1,501,350,000.00 — — — 1,501,350,000.00
鄄城晨鳴板材有限公司
(Juancheng Chenming Panels Co., Ltd.) 15,000,000.00 15,000,000.00 — — — 15,000,000.00
山東禦景大酒店有限公司
(Shandong Grand View Hotel Co., Ltd) 80,500,000.00 80,500,000.00 — — — 80,500,000.00
湛江晨鳴漿紙有限公司
(Zhanjiang Chenming Paper Pulp Co.,Ltd) 500,000,000.00 500,000,000.00 — — — 500,000,000.00
香港晨鳴有限公司
(Chenming (HK) Limited) 783,310.00 783,310.00 — — — 783,310.00
晨鳴現代物流有限公司
(Shouguang Chenming Modern Co., Ltd) 10,000,000.00 10,000,000.00 — — — 10,000,000.00
晨鳴美術紙有限公司
(Shouguang Chenming Art Paper Co., Ltd) 113,616,063.80 113,616,063.80 — — — 113,616,063.8095
VII. Notes to the financial statements (continued)
10. Long-term equity investments (continued)
The Company (continued)
(1) (continued)
Investment Investment
addition deduction Equity adjustment
Name of investee companies Initial investment Opening balance for the year for the year for the year Closing balance
RMB RMB RMB RMB RMB RMB
Investments made to subsidiaries (continued)
富裕晨鳴紙業有限責任公司
(Fuyu Chenming Paper Co., Ltd) 208,000,000.00 208,000,000.00 — — — 208,000,000.00
咸甯晨鳴林業發展有限責任公司
(Xianning Chenming Arboriculture
development Co., Ltd.) 10,000,000.00 10,000,000.00 — — — 10,000,000.00
黃岡晨鳴漿紙有限公司
(Huanggang Chenming Paper Co., Ltd.) 20,000,000.00 20,000,000.00 — — — 20,000,000.00
黃岡晨鳴林業發展有限責任公司
(Huanggang Chenming Arboricultre
Co., Ltd.) 10,000,000.00 10,000,000.00 — — — 10,000,000.00
壽光美倫紙業有限責任公司
(Shouggang Meilun Paper Co., Ltd)
(Note 1) 20,000,000.00 — 20,000,000.00 — — 20,000,000.00
Sub-total 4,009,185,807.88 3,989,185,807.88 20,000,000.00 — — 4,009,185,807.88
Investment made to associates
壽光麗奔制紙有限公司
(Shouguang Liben Paper Making Co., Ltd) 19,550,000.00 18,343,441.71 — — 5,504.47 18,348,946.18
阿爾諾維根斯晨鳴特種紙有限公司
(Arjo Wiggins Chenming Specialty Paper
Co., Ltd.) 80,100,000.00 48,478,865.50 — — (9,410,441.25 ) 39,068,424.25
青州市晨鳴變性澱粉有限責任公司
(Qingzhou Chenming Denaturation
Amylum Co., Ltd) 540,000.00 900,000.00 — — — 900,000.00
江西江報傳媒彩印有限公司 (Note 2) 6,000,000.00 6,000,000.00 — (126,783.34 ) 5,873,216.66
Sub-total 106,190,000.00 67,722,307.21 6,000,000.00 — (9,531,720.12 ) 64,190,587.0996
VII. Notes to the financial statements (continued)
10. Long-term equity investments (continued)
The Company (continued)
(1) (continued)
Investment Investment
addition deduction Equity adjustment
Name of investee companies Initial investment Opening balance for the year for the year for the year Closing balance
RMB RMB RMB RMB RMB RMB
Other investments
濰坊創業投資有限公司 1,000,000.00 1,000,000.00 — — — 1,000,000.00
泰山保險經紀有限公司 2,000,000.00 2,000,000.00 — — — 2,000,000.00
山東紙業集團轂公司 200,000.00 200,000.00 — — — 200,000.00
浙江省廣育報業印務有限公司 2,000,000.00 2,000,000.00 — — — 2,000,000.00
濟南商友商務有限責任公司 350,000.00 350,000.00 — — — 350,000.00
壽光彌河水務有限公司 20,000,000.00 20,000,000.00 — — — 20,000,000.00
上海林嘉紙電子商務有限公司 1,400,000.00 1,400,000.00 — — — 1,400,000.00
Sub-total 26,950,000.00 26,950,000.00 — — — 26,950,000.00
Impairment of provision of
long-term investment — (1,998,538.07 ) (1,998,538.07 )
Total 4,142,325,807.88 4,081,859,577.02 4,098,327,856.90
Note 1: As at 30 June 2009, the Company contributed capital into Shouguang Meilun Paper Co. Ltd., which had a registered
capital of RMB20 million and was wholly owned by Shangdong Chenming Paper Holdings Limited.
Note 2: In February, 2009, the Company and a shareholder of 江西江報傳媒彩印有限公司 entered into an equity transfer
agreement, pursuant to which, the Company acquired 21.15% interest of 江西江報傳媒彩印有限公司 from its
previous shareholder.
There was no restriction on the ability of the investee in which the long-term equity investments are held by the Group
and the Company as at 30 June 2009 to transfer capital to the Group.97
VII. Notes to the financial statements (continued)
11. Investment Properties
The Group and the Company
Buildings
RMB
Original value
2008.12.31 38,291,395.70
Increased for the period —
2009.6.30 38,291,395.70
Accumulated depreciation
2008.12.31 10,126,671.55
Increased for the period 869,128.02
2009.6.30 10,995,799.57
Net amount
2008.12.31 28,164,724.15
2009.6.30 27,295,596.13
Properties held for investment represent part of the offices of 北京數碼大廈 (for leasing out) as held by the Company.98
VII. Notes to the financial statements (continued)
12. Fixed Assets
The Group
Machinery Electric appliance
Buildings & Equipment Vehicles and others Total
RMB RMB RMB RMB RMB
Opening balance
2008.12.31 3,302,679,556.63 15,533,422,474.92 136,284,697.18 515,778,009.69 19,488,164,738.42
Increase due to acquisition
of subsidiaries 773,126.63 451,022.14 7,134,689.04 45,473.74 8,404,311.55
Decrease due to cancellation
of subsidiaries — — — — —
Additions 76,947,148.01 (39,708,124.67 ) 7,766,692.82 252,286.85 45,258,003.01
Transfers from construction
in progress 11,937,806.63 140,750,207.32 — 2,513,730.46 155,201,744.41
Deductions (14,783,942.47 ) (111,627,432.90 ) (6,005,944.30 ) (1,847,208.72 ) (134,264,528.39 )
2009.6.30 3,377,553,695.43 15,523,288,146.81 145,180,134.74 516,742,292.02 19,562,764,269.00
Accumulated depreciation
2008.12.31 561,806,858.61 4,431,351,341.13 55,347,764.77 224,421,016.98 5,272,926,981.49
Increase due to acquisition
of subsidiaries 183,111.92 193,570.63 1,804,089.79 29,970.18 2,210,742.52
Additions 56,855,871.48 502,985,799.49 7,659,422.14 27,579,878.74 595,080,971.85
Deductions (8,047,158.78 ) (24,804,442.09 ) (3,326,933.44 ) (708,641.97 ) (36,887,176.28 )
2009.6.30 610,798,683.23 4,909,726,269.16 61,484,343.26 251,322,223.93 5,833,331,519.58
Impairment provision
2008.12.31 — 1,795,998.85 — — 1,795,998.85
Decrease due to cancellation
of subsidiaries — — — — —
Increased provision — — — — —
Reversals — — — — —
2009.6.30 — 1,795,998.85 — — 1,795,998.85
Net value
2008.12.31 2,740,872,698.02 11,100,275,134.94 80,936,932.41 291,356,992.71 14,213,441,758.08
2009.6.30 2,766,755,012.20 10,611,765,878.80 83,695,791.48 265,420,068.09 13,727,636,750.5799
VII. Notes to the financial statements (continued)
12. Fixed Assets (continued)
The Group (continued)
Note 1: International Finance Corporation (“IFC”), Deutsche Bank AG (“DEG”) and China Construction Bank Nanchang Changbei
Branch entered into an loan agreement with Jiangxi Chenming Paper Co., Ltd, a subsidiary of the Company, pursuant to
which, secured loans of USD 40,000,000.00, USD 9,411,765.00 and USD 17,500,000.00 were provided to Jiangxi
Chenming Paper Co., Ltd by the above financial institutions respectively. The collateral was the fixed assets and land use
rights of Jiangxi Chenming Paper Co., Ltd. On 30 June 2009, USD 17,196,078.23 of the above borrowed amount has been
already repaid. On 30 June 2009, the net book value of the collateral with regard to fixed assets was RMB 1,113,812,474.50
and that with regard to the land use rights and intangible assets was RMB 73,852,307.78.
Note 2: At as 30 June 2009, the Group had no fixed assets held under operation lease.
Note 3: At as 30 June 2009, the net book value of the buildings without house property right certificates in the fixed assets of the
Group was RMB 237,188,599.63 (2008: RMB242,268,202.56). The related house property right certificates were being
applied.100
VII. Notes to the financial statements (continued)
12. Fixed Assets (continued)
The Company
Machinery Electric appliance
Buildings & Equipment Vehicles and others Total
RMB RMB RMB RMB RMB
Opening balance
2008.12.31 1,004,386,324.00 8,293,311,116.47 34,823,847.12 35,545,416.73 9,368,066,704.32
Additions 66,499,588.36 (63,974,986.10 ) 7,718,463.55 343,624.83 10,586,690.64
Transfer from construction
in progress — — — — —
Deductions (14,783,942.47 ) (41,617,687.76 ) (4,671,343.54 ) (327,021.77 ) (61,399,995.54 )
2009.6.30 1,056,101,969.89 8,187,718,442.61 37,870,967.13 35,562,019.79 9,317,253,399.42
Accumulated depreciation
2008.12.31 225,290,430.50 2,846,446,936.27 15,697,810.81 22,012,976.21 3,109,448,153.79
Additions 20,620,949.07 295,071,989.37 1,505,036.52 1,955,178.28 319,153,153.24
Deductions (8,047,158.78 ) (19,042,541.83 ) (2,615,578.01 ) (293,247.42 ) (29,998,526.04 )
2009.6.30 237,864,220.79 3,122,476,383.81 14,587,269.32 23,674,907.07 3,398,602,780.99
Net value
2008.12.31 779,095,893.50 5,446,864,180.20 19,126,036.31 13,532,440.52 6,258,618,550.53
2009.6.30 818,237,749.10 5,065,242,058.80 23,283,697.81 11,887,112.72 5,918,650,618.43
Note 1: At as 30 June 2009, the Group had no fixed assets held under operation lease.
Note 2: At as 30 June 2009, the net book value of the buildings without house property right certificates in the fixed
assets of the Group was RMB 2,514,597.51 (2008: RMB4,705,794.76). The related house property right
certificates were being applied.101
VII. Unaudited Financial Statements and Notes thereto Prepared in
Accordance with Accounting Standards for Business Enterprises
VII. Notes to the financial statements (continued)
13. Construction in progress
The Group
Transfers to Investment
fixed assets At the end Budgeted to budgeted
Items Opening balance Additions during the year of the year Sources of funds costs costs
RMB RMB RMB RMB RMB 100 %
million
Technological improvement 18,256,028.98 29,163,721.78 22,798,371.72 24,621,379.04 Borrowings and N/A N/A
to fixed asset (Jilin Chenming) self-owned funds
Zhangjiang pulp project (Zhanjiang) 17,937,903.37 4,343,178.23 22,281,081.60 Borrowings and 58.22 0.31
self-owned funds
Transform of stove diatation
And evaporation stations (Wuhan) 13,010,968.26 619,210.99 13,630,179.25 — self-owned funds 0.22 61.96
Transform of de-inking with dispersing hot
and recovery bleaching (Wuhan) 17,885,491.14 729,243.49 — 18,614,734.63 self-owned funds 0.15 124.10
Transform project of Desulphurization for
coal Powder stoves of power plants (Wuhan) 13,646,962.99 1,779,192.15 — 15,426,155.14 self-owned funds 0.15 102.84
Handling of middle level of Water
by draining workshops (Qihe) 35,159,901.70 4,963,821.35 — 40,123,723.05 self-owned funds 0.39 104.69
Rubbish incineration stove project 91,699,548.68 (9,876,627.48 ) 81,642,430.57 180,490.63 Borrowings and 0.87 94.05
(electricity and steam) self-owned funds
Thermoelectrical pipes of eastern cities 1,500,273.03 14,416,041.85 — 15,916,314.88 borrowings and 0.3 53.05
(electricity and steam) self-owned funds
Pulp machine engineering (Jiangxi) 30,973,725.01 22,474,592.61 — 53,448,317.62 self-owned funds 1.20 44.54
Transform of technology of
Qihe 4400 Paper engineering 32,808,843.00 6,774,498.45 — 39,583,341.45 self-owned funds 0.32 123.31
Others 158,499,626.34 185,111,101.68 37,130,762.87 306,479,965.15 self-owned funds N/A N/A
Net construction in progress 431,379,272.50 260,497,975.10 155,201,744.41 536,675,503.19
Including: capitalized interest expenses 1,785,963.30 1,051,840.00 — 2,837,803.30
Net construction in progress 431,379,272.50 260,497,975.10 155,201,744.41 536,675,503.19
As at 30 June 2009, closing balance of construction in progress of the Group included RMB2,837,803.30 of interest
capitalized. Borrowing expense from capitalization for the year included RMB3,265,665.00 (the prior year: RMB
24,043,281.70). The capitalizing rate to determine the general borrowing capitalized was 5.47%-6.89% (the prior year:
6.72%).102
VII. Notes to the financial statements (continued)
13. Construction in progress (continued)
The Company
Transfers to Investment
fixed assets At the end Budgeted to budgeted
Items Opening balance Additions during the year of the year Sources of funds costs costs
RMB RMB RMB RMB RMB 100 %
million
Others 59,788,891.26 49,011,252.02 — 108,800,143.28 self-owned fund N/A N/A
Total 59,788,891.26 49,011,252.02 — 108,800,143.28
As at 30 June 2009, closing balance of construction in progress of the Company did not include interest capitalized
(interest capitalized for the prior year: nil).
14. Intangible assets
The Group
Land use rights Software Total
RMB RMB RMB
Cost
2008.12.31 1,374,432,504.26 15,115,623.05 1,389,548,127.31
Increase due to acquisition
of subsidiaries 6,172,413.47 6,172,413.47
Additions for the period 20,473,583.72 90,000.00 20,563,583.72
Deductions for the period (7,894,701.65) — (7,894,701.65)
2009.6.30 1,393,183,799.80 15,205,623.05 1,408,389,422.85
Accumulated depreciation
2008.12.31 106,868,006.95 5,603,531.83 112,471,538.78
Increase due to acquisition
of subsidiaries 443,746.07 443,746.07
Additions for the period 13,644,888.65 817,243.68 14,462,132.33
Transferred to amortisation
during the period (1,322,454.96) (1,322,454.96)
2009.6.30 119,634,186.71 6,420,775.51 126,054,962.22
Net value
2008.12.31 1,267,564,497.31 9,512,091.22 1,277,076,588.53
2009.6.30 1,273,549,613.09 8,784,847.54 1,282,334,460.63
Note 1: For the details of intangible assets°Xland use rights as collateral, please refer to notes VII.11.
Note 2: As at 30 June 2009, the net book value of the buildings without house property right certificates in the intangible assets of
the Group was RMB145,624,804.79 (2008: RMB147,502,707.53). The related house property right certificates were being
applied.103
VII. Notes to the financial statements (continued)
14. Intangible assets
The Company
Land use rights Software Total
RMB RMB RMB
Cost
2008.12.31 386,987,754.06 14,787,993.05 401,775,747.11
Additions — 90,000.00 90,000.00
Deductions (7,628,770.79) — (7,628,770.79)
2009.6.30 379,358,983.27 14,877,993.05 394,236,976.32
Accumulated depreciation
2008.12.31 31,720,852.58 5,545,497.54 37,266,350.12
Additions 2,501,935.04 742,399.68 3,244,334.72
2009.6.30 34,222,787.62 6,287,897.22 40,510,684.84
Net value
2008.12.31 355,266,901.48 9,242,495.51 364,509,396.99
2009.6.30 345,136,195.65 8,590,095.83 353,726,291.48
Note 1: As at 30 June 2009, the net book value of the buildings without house property right certificates in the intangible assets of
the Company was RMB 86,239,971.50 (2008: RMB87,510,874.22). The related house property right certificates were
being applied.104
VII. Notes to the financial statements (continued)
15. Goodwill
The Group
Accumulated
Accumulated
for this year for last year
RMB RMB
Cost
Opening balance 20,283,787.17 20,283,787.17
Closing balance 20,283,787.17 20,283,787.17
Accumulated impairment loss — —
Book value
Opening balnace 20,283,787.17 20,283,787.17
Closing balance 20,283,787.17 20,283,787.17
Goodwill of the Group arose from acquisition of minority interests in prior years by a subsidiary of the Company.
On balance sheet date, the management of the Group assesses the recoverable amount of cash-generating units which
result in goodwill, in order to determine whether to make provision for impairment loss accordingly. The recoverable
amount of cash-generating units is determined based on the estimated cash flow in financial budget of five years in the
future by the management, relying on the expected annual growth rate in GNP and the expected and steady annual growth
rate in the industry by market players to calculate. The management of the Group expects no provision for impairment
loss is necessary to be made for goodwill during the reporting period.
16. Long term expenses to be amortized
The Group
2009.6.30 2008.12.31
RMB RMB
Transforming expense on fixed assets
held under operation lease 44,014,023.55 37,227,730.36
Equipment leasing expense — —
Total 44,014,023.55 37,227,730.36105
VII. Notes to the financial statements (continued)
17. Deferred income tax assets
The Group
Deductible temporary
Items difference and deductible loss Deferred income tax assets
2009.6.30 2008.12.31 2009.6.30 2008.12.31
RMB RMB RMB RMB
Impairment provision 234,981,210.78 355,721,066.79 56,213,035.29 73,033,025.79
Prepaid salaries of
senior management 119,673,269.02 105,199,345.76 29,572,197.45 22,754,863.62
Deductible tax loss 64,199,248.37 44,187,567.66 16,049,812.09 11,046,891.91
Unpaid payables 44,728,300.20 46,165,858.44 11,182,075.05 10,870,385.92
Preliminary expenses 6,447,823.13 9,423,741.50 805,977.89 1,177,967.69
Unrealized profit arising
from intra-group
transactions 28,042,260.95 2,043,549.51 7,010,565.24 510,887.38
Deferred income 52,604,089.52 44,248,375.23 12,077,522.38 8,522,343.81
Total 550,676,201.97 606,989,504.89 132,911,185.39 127,916,366.12
The Company
Deductible temporary
Items difference and deductible loss Deferred income tax assets
2009.6.30 2008.12.31 2009.6.30 2008.12.31
RMB RMB RMB RMB
Impairment provision 166,201,528.84 202,143,794.82 41,550,382.21 50,835,948.71
Prepaid salaries of
senior management 86,773,669.72 69,343,461.44 21,693,417.43 17,335,865.36
Unpaid payables 38,068,073.32 36,198,088.68 9,517,018.33 9,049,522.17
Deferred income 10,387,541.96 5,537,541.95 2,596,885.49 1,384,385.49
Total 301,430,813.84 313,222,886.89 75,357,703.46 78,605,721.73
18. Consumable biological assets
The Group
Fair value
Closing Breeding Change at the end
Items Amount balance Purchase costs in fair value Disposal of the year
(000’ mu ) RMB RMB RMB RMB RMB RMB
Trees 2,030 301,212,691.14 12,503,535.79 107,008,890.07 1,992,559.76 22,365.52 422,695,311.24106
VII. Notes to the financial statements (continued)
19. Provision for impairment of assets
The Group
Charged
2008.12.31 during the year Reversals Other write-offs 2009.6.30
RMB RMB RMB RMB RMB
Provisions for bad debts 218,773,938.26 27,132,855.58 (3,577,380.94 ) (283,954.65 ) 242,045,458.25
Of which: trade receivables 167,227,971.21 26,508,239.59 (389,321.49 ) (130,154.65 ) 193,216,734.66
other receivables 51,545,967.05 624,615.99 (3,188,059.45 ) (153,800.00 ) 48,828,723.59
Provisions for inventory
impairment 134,806,380.46 7,953,890.99 (123,798,251.90 ) — 18,962,019.55
Impairment provisions
for long-term equity
investments 1,998,538.07 — — 1,998,538.07
Impairment provisions for
held-to-maturity investments 142,210.00 — — — 142,210.00
Impairment provisions for
fixed assets 1,795,998.85 — — 1,795,998.85
Total 357,517,065.64 35,086,746.55 (127,375,632.84 ) (283,954.63 ) 264,944,224.72
The Company
Charged
2008.12.31 during the year Reversals Other write-offs 2009.6.30
RMB RMB RMB RMB RMB
Provisions for bad debts 153,502,449.59 15,641,240.80 (2,849,371.67 ) (92,789.92 ) 166,201,528.80
Of which:trade receivables 134,601,849.59 15,641,240.80 — (92,789.92 ) 150,150,300.47
Other receivables 18,900,600.00 — (2,849,371.67 ) — 16,051,228.33
Provisions for inventory
impairment 46,500,597.16 — (46,500,597.16 ) — —
Impairment provisions
for long-term equity
investments 1,998,538.07 — — 1,998,538.07
Impairment provisions for
held-to-maturity investments 142,210.00 — — — 142,210.00
Total 202,143,794.82 15,641,240.80 (49,349,968.83 ) (92,789.92 ) 168,342,276.87107
VII. Notes to the financial statements (continued)
20. Short-term borrowings
The Group
2009.6.30 2008.12.31
RMB RMB
Credit loans 2,072,050,487.58 1,055,569,455.58
Charged borrowings (Note 1) 40,000,000.00 57,086,500.00
Secured bill borrowings 29,502,671.98 3,178,705.32
Discounted bills 2,757,406,186.16 401,110,381.77
Total 4,898,959,345.72 1,516,945,042.67
Note 1: For details of charged borrowings were guarantees provided by the Company to its subsidiaries for their longterm and
short-term borrowings, please see Note VIII.(3)(e).
The Company
2009.6.30 2008.12.31
RMB RMB
Credit loans 1,973,743,070.00 926,698,296.93
Discounted bills 2,346,656,892.94 217,370,008.75
Total 4,320,399,962.94 1,144,068,305.68
As at 30 June 2009, none of the short-term borrowings of the Group and the Company were overdue.
21. Financial liabilities held for trading
The Group
2009.6.30 2008.12.31
RMB RMB
Financial liabilities held for trading – future pooling
foreign exchange contracts 5,200,000.00 198,900.00
The Company
At the end
At the beginning
of the year of the year
RMB RMB
Financial liabilities held for trading – future pooling
foreign exchange contracts 5,200,000.00 —108
VII. Notes to the financial statements (continued)
22. Bills payable
The Group
2009.6.30 2008.12.31
RMB RMB
Bank acceptance 326,094,292.58 367,627,562.14
The Company
2009.6.30 2008.12.31
RMB RMB
Bank acceptance 184,923,314.39 210,151,045.59
As at 30 June 2009, the balance of the bills payable of the Group and the Company was not due to any shareholders
holding over 5% (5% inclusive) of the Company’s shares.
23. Accounts payable
The Group
2009.6.30 2008.12.31
Amount Percentage Amount Percentage
RMB % RMB %
Within 1 year 1,932,559,516.53 90.72 2,493,702,616.41 94.38
1-2 years 117,108,835.37 5.50 98,420,284.82 3.72
2-3 years 46,787,933.83 2.20 17,647,797.85 0.67
Over 3 years 33,630,163.92 1.58 32,537,486.82 1.23
Total 2,130,086,449.65 100.00 2,642,308,185.90 100.00109
VII. Notes to the financial statements (continued)
23. Accounts payable (continued)
The Company
2009.6.30 2008.12.31
Amount Percentage Amount Percentage
RMB % RMB %
Within 1 year 1,581,234,022.87 96.44 1,675,493,370.59 97.64
1-2 years 30,767,830.30 1.88 17,223,583.36 1.00
2-3 years 11,307,608.40 0.69 7,450,362.04 0.43
Over 3 years 16,372,089.60 0.99 15,864,479.18 0.93
Total 1,639,681,551.17 100.00 1,716,031,795.17 100.00
At the end of the reporting period, the balance of the accounts payable of the Group and the Company was not due to any
shareholders holding over 5% (5% inclusive) of the Company’s shares.
As at 30 June 2009, the accounts payable of the Group and the Company aged over three years were insignificant. There
was no significant payable amounts aged over three years.
24. Advances from customers
The Group
2009.6.30 2008.12.31
Amount Percentage Amount Percentage
RMB % RMB %
Within 1 year 184,010,239.45 95.35 97,372,384.90 95.75
Over 1 year 8,976,383.86 4.65 4,321,193.67 4.25
Total 192,986,623.31 100.00 101,693,578.57 100.00
The Company
2009.6.30 2008.12.31
Amount Percentage Amount Percentage
RMB % RMB %
Within 1 year 132,991,251.28 98.71 65,671,850.62 99.47
Over 1 year 1,734,227.41 1.29 347,607.25 0.53
Total 134,725,478.69 100.00 66,019,457.87 100.00
At the end of the reporting period, the advances from customers of the Group and the Company were not received from
any shareholders holding over 5% (5% inclusive) of the Company’s shares.
At the end of the reporting period, the advances from customers of the Group and the Company aged over one year were
insignificant. There were no significant advance receipts aged over one year.110
VII. Notes to the financial statements (continued)
25. Employee benefits payable
The Group
Accrued Paid
2008.12.31 during the year during the year 2009.6.30
RMB RMB RMB RMB
Salaries, bonus, allowance and subsidies 116,988,177.41 200,007,791.80 (171,541,697.19 ) 145,454,272.02
Staff welfare 1,862,768.28 14,063,915.31 (14,514,034.07 ) 1,412,649.52
Social insurance premiums 19,723,816.99 49,082,010.30 (49,164,883.15 ) 19,640,944.14
Of which: 1. Medical insurance premium 12,380,155.40 7,920,981.68 (8,742,142.67 ) 11,558,994.41
2. Pension insurance premium 4,828,680.73 36,177,491.36 (35,667,777.70 ) 5,338,394.39
4. Unemployment insurance
premium 241,174.38 3,539,382.65 (3,274,973.99 ) 505,583.04
5. Work-related injury insurance
premium 16,064.03 972,582.10 (956,093.56 ) 32,552.57
6. Maternity insurance premium 2,257,742.45 471,572.51 (523,895.23 ) 2,205,419.73
Housing provident funds 11,304,105.17 16,324,713.97 (17,543,706.58 ) 10,085,112.56
Union operation costs and
employee education costs 20,647,664.66 4,871,171.58 (1,786,341.93 ) 23,732,494.31
Others 19,682,534.62 39,651.40 (128,157.06 ) 19,594,028.96
Of which:housing subsidies for
Chinese employees 18,722,869.49 — — 18,722,869.49
Total 190,209,067.13 284,389,254.36 (254,678,819.98 ) 219,919,501.51
The Company
Accrued Paid
2008.12.31 during the year during the year 2009.6.30
RMB RMB RMB RMB
Salaries, bonuses, allowance and subsidies 70,985,190.59 88,283,329.98 (70,853,121.68 ) 88,415,398.89
Staff welfare — 6,206,143.65 (6,206,143.65 ) —
Social insurance premiums — 18,246,098.59 (16,965,744.85 ) 1,280,353.74
Of which: 1. Medical insurance premium — 1,279,066.51 (1,029,261.17 ) 249,805.34
2. Pension insurance premium — 15,331,575.29 (14,395,310.68 ) 936,264.61
4. Umployment insurance premium — 1,635,421.29 (1,541,137.50 ) 94,283.79
5. Work-related injury insurance
premium — 17.75 (17.75 ) —
6. Maternity insurance — 17.75 (17.75 ) —
Housing provident funds 1,338,130.84 6,100,727.94 (6,887,738.05 ) 551,120.73
Union operation costs and employee
education costs 7,842,168.68 1,627,932.12 (106,795.50 ) 9,363,305.30
Others 18,722,869.49 — 18,722,869.49
Of which:housing subsidies for
Chinese employees 18,722,869.49 — — 18,722,869.49
Total 98,888,359.60 120,464,232.28 (101,019,543.73 ) 118,333,048.15111
VII. Notes to the financial statements (continued)
26. Taxes payables
The Group
2009.6.30 2008.12.31
RMB RMB
Value added tax 39,133,824.06 10,700,714.79
Business tax 7,891,475.52 8,328,952.19
Urban maintenance and construction tax 247,044.92 310,202.69
Corporate income tax 44,739,894.59 9,374,319.26
Individual income tax 1,334,078.18 663,205.18
Property tax 6,179,216.58 4,889,784.09
Stamp duty 3,277,146.09 4,259,535.24
Land use tax 7,005,920.39 10,025,255.88
Land appreciation tax — —
Educational surcharges and others 2,016,779.80 1,414,013.02
Total 111,825,380.13 49,965,982.34
The Company
2009.6.30 2008.12.31
RMB RMB
Value added tax 33,006,420.77 —
Business tax 7,567,193.78 7,376,897.19
Corporate income tax 32,834,378.44 —
Individual income tax 309,192.58 415,724.04
Property tax 1,773,182.42 1,797,106.29
Stamp duty 1,804,450.58 2,834,609.11
Land use tax 2,426,851.10 3,731,843.88
Total 79,721,669.67 16,156,180.51
27. Dividends payable
The Group and The Company
2009.6.30 2008.12.31
RMB RMB
Legal person shares 14,686,272.16 36,089.31
Public shares 88,452,114.20
103,138,386.36 36,089.31112
VII. Notes to the financial statements (continued)
28. Other payables
The Group
2009.6.30 2008.12.31
Amount Percentage Amount Percentage
RMB % RMB %
Within 1 year 105,470,396.72 28.63 205,978,354.37 59.49
1-2 years 107,729,559.46 29.25 23,880,416.86 6.90
2-3 years 107,254,810.24 29.12 80,003,356.68 23.11
Over 3 years 47,890,721.20 13.00 36,364,114.15 10.50
Total 368,345,487.62 100.00 346,226,242.06 100.00
The Company
2009.6.30 2008.12.31
Amount Percentage Amount Percentage
RMB % RMB %
Within 1 year 85,552,441.12 35.49 151,374,567.79 53.47
1-2 years 57,570,239.31 23.88 27,036,339.92 9.55
2-3 years 76,721,557.74 31.83 91,357,173.17 32.27
Over 3 years 21,187,494.77 8.80 13,331,160.98 4.71
Total 241,031,732.94 100.00 283,099,241.86 100.00
The other payables of the Group and the Company as at 30 June 2009 were not due to any shareholders who hold over 5%
(5% inclusive) of the Company’s shares.113
VII. Notes to the financial statements (continued)
29. Non-current liabilities due within one year
The Group
Type 2009.6.30 2008.12.31
RMB RMB
Long-term borrowings due within one year 382,381,364.15 1,038,125,240.62
The Company
Type 2009.6.30 2008.12.31
RMB RMB
Long-term borrowings due within one year 280,107,900.00 883,602,600.00
30. Short-term debentures payable
The Group
Type 2009.6.30 2008.12.31
RMB RMB
Short-term debentures 1,252,519,999.98 1,941,874,444.43
The Company
Type 2009.6.30 2008.12.31
RMB RMB
Short-term debentures 1,252,519,999.98 1,941,874,444.43
The Company was approved, by a circular issued by the People’s Bank of China (Yinfa [2007] No.427), to issue
short-term debentures maturing in one year with aggregated par values of RMB1,200,000,000.00 on 29 August 2008. The
debentures are unsecured, bearing interest rate of 5.20% per annum and repayable on maturity with one-off interest
payment.114
VII. Notes to the financial statements (continued)
31. Long-term borrowings
The Group
Type 2009.6.30 2008.12.31
Amounts in Exchange rate Amounts in Exchange rate
original currency on translation RMB original currency on translation RMB
Credit loans - RMB 3,141,058,927.11 1.0000 3,141,058,927.11 3,120,692,035.94 1.0000 3,120,692,035.94
Credit loans - USD 101,000,000.00 6.8319 690,021,900.00 121,000,000.00 6.8346 826,986,600.00
Secured borrowings - USD 51,222,821.83 6.8319 349,949,196.47 55,992,973.77 6.8346 382,689,578.54
Charged borrowings – RMB (Note1) 423,415,950.00 1.0000 423,415,950.00 715,047,300.00 1.0000 715,047,300.00
Charged borrowings – USD (Note 1) 1,000,000.00 6.8319 6,831,900.00 1,750,000.00 6.8346 11,960,550.00
Total 4,611,277,873.58 5,057,376,064.48
Less: long-term borrowings due within one year 382,381,364.15 1,038,125,240.62
Including: Credit loans - RMB 330,000,000.00 1.0000 330,000,000.00
Credit loans - USD 41,000,000.00 6.8319 280,107,900.00 81,000,000.00 6.8346 553,602,600.00
Secured borrowings - USD 14,469,988.46 6.8319 98,857,514.15 12,359,953.86 6.8346 84,475,340.62
Charged borrowings - RMB 3,415,950.00 1.0000 3,415,950.00 70,047,300.00 1.0000 70,047,300.00
Long-term borrowings due after one year 4,228,896,509.43 4,019,250,823.86
The above borrowings have maturities between 2009 and 2023, including floating-rate and fixed-rate borrowings at
interest rates ranging from 1.29% to 6.64% per annum.
Note 1: Guarantees were provided by the Company and subsidiaries to its subsidiaries, among which were guarantees provided by
Jiangxi Chenming Paper Co., Ltd., a subsidiary of the Company, for its subsidiary with a guarantee amount of
RMB20,000,000.00. The remaining was guarantees provided by the Company for its subsidiaries. For specific amounts,
please see Note VIII.(3)(e).
The Company
Type 2009.6.30 2008.12.31
Amounts in Exchange rate Amounts in Exchange rate
original currency on translation RMB original currency on translation RMB
Credit loans - RMB 3,110,692,035.94 1.0000 3,110,692,035.94 3,120,692,035.94 1.0000 3,120,692,035.94
Credit loans - USD 101,000,000.00 6.8319 690,021,900.00 121,000,000.00 6.8346 826,986,600.00
Total 3,800,713,935.94 3,947,678,635.94
Less: long-term borrowings within one year 280,107,900.00 883,602,600.00
Including: Credit loans - RMB 330,000,000.00 1.0000 330,000,000.00
Credit loans - USD 41,000,000.00 6.8319 280,107,900.00 81,000,000.00 6.8346 553,602,600.00
Long-term borrowings due after one year 3,520,606,035.94 3,064,076,035.94
The above borrowings have maturities between 2009 and 2012, including floating-rate and fixed-rate borrowings at
interest rates ranging from 1.29% to 6.64% per annum.115
VII. Notes to the financial statements (continued)
32. Deferred income
The Group
Increase Decrease
Type 2008.12.31 for the year for the year 2009.6.30
RMB RMB RMB RMB
Funds for three projects in
connection with technology
allocated by the local
financial authority 80,000.00 — — 80,000.00
Special subsidy fundsfor
environmental protection (1) 13,416,500.00 11,340,000.00 577,678.57 24,178,821.43
Project fund for National
technological support
scheme (2) 1,731,203.33 1,650,000.00 3,381,203.33
Special subsidy fund for
Songhuajiang environmental
protection project 30,852,083.28 — 971,250.05 29,880,833.23
Modification of alkaline
Recycling system 1,456,250.00 — 37,500.00 1,418,750.00
Atmospheric pollution prevention
And treatment subsidy fund 1,000,000.00 — — 1,000,000.00
Sewage treatment and water
Conservation reconfiguration
project 4,700,000.00 — — 4,700,000.00
Financial grants for technological
modification Project 2,000,000.00 — 155,357.13 1,844,642.87
Others (3) 1,592,338.62 35,000,000.00 — 36,592,338.62
Total 56,828,375.23 47,990,000.00 1,741,785.75 103,076,589.48
The Company
Increase Decrease
Type 2008.12.31 for the year for the year 2009.6.30
RMB RMB RMB RMB
Special subsidy funds for
Environment protection 2,714,000.00 3,200,000.00 — 5,914,000.00
Project fund for National
Technological support scheme 1,731,203.33 1,650,000.00 — 3,381,203.33
Others 1,092,338.62 — — 1,092,338.62
Total 5,537,541.95 4,850,000.00 — 10,387,541.95116
VII. Notes to the financial statements (continued)
32. Deferred income (continued)
The Company (continued)
(1) Pursuant to the “Notice Regarding Budget Indicators for distribution of the government’s 2009 subsidy funds for
increasing domestic demand to Qihe Chenming Paper Co., Ltd. for the transformation of its energy conservation
system of paper machine”《關於下達2009年齊河晨鳴板紙有限責任公司紙機詳能改造擴大內需國家補助預算指標的通
知》, Qihe Chenming Paper Co., Ltd., a subsidiary of the Company, received special subsidy fund of RMB
2,000,000.00 in 2009. Pursuant to the “Notice Regarding Budget Indicators for Settlement of 2007 and Advance
allocation of 2008 Energy Conversation and Technological Modificaton Financial Incentive Funds (First Batch) by
the Financial Bureau of Provincial government” 《省財政廳關於清算2007年和預撥2008年詳能技術改造財政獎勵資
金(第一批)的通知》 issued by the Financial Bureau of Wubei Province, Chibi Chenming Paper Co., Ltd, a subsidiary
of the Company, received special subsidy fund of RMB 2,000,000.00 in 2009. Pursuant to “Cai Jian (2008) No. 777
Document” (財建(2008)777號文件) issued by the Financial Bureau, Jilin Chenming Paper Co., Ltd., a subsidiary of
the Company, received special subsidy fund of RMB 4,140,000.00 for transformation of DIP vehicles and energy
conservation system of No. 10 paper machines. Pursuant to the “Notice Regarding Distribution of environmental
subsidy fund by county-level authorities”《關於撥付省級生態補償資金的通知》issued by the Financial Department of
Shouguang City, the Company received environmental subsidy fund granted by county-level authorities of RMB
3,000,000.00°CPursuant to the “Notice Regarding the Distribution of 2008 Energy Conservation Incentive Funds”
《關於下達2008年度詳能獎勵資金的通知》issued by the Financial Department of Shouguang City, the Company
received energy conservation incentive funds of RMB 200,000.00 in 2009.
(2) The Company received the 2009 National technological support scheme project fund of RMB 1,650,000.00. The
accounts payable of such project were used mainly for the pulping project that uses mixed wide leaves for bleaching
in a chemithermomechanical pulping process and used for the studies of critical technologies.
(3) Pursuant to the “Memorandum Regarding the establishment of ancillary engineering of Zhanjiang Pulp Project”《關
於湛江木漿項目配套工程建設備忘錄》nentered by the people’s government of Zhanjiang City and Zhanjiang
Chenming Paper Pulp Co., Ltd., Zhanjing Chenming Paper Pulp Co., Ltd., a subsidiary of the Company, received
special subsidy fund of RMB 35,000,000.00 in 2009 for establishment of pulp project and construction of related
infrastructure as well as discount interest funds.117
VII. Notes to the financial statements (continued)
33. Deferred income tax liabilities
The Group
Temporary differences Taxable temporary differences Deferred income tax liabilities
Closing balance Opening balance Closing balance Opening balance
RMB RMB RMB RMB
Changes in fair value
of consumable
biological assets 27,718,743.28 25,726,183.52 6,929,685.73 6,431,545.79
34. Share capital
The registered and paid-in share capital of the Company of RMB1 each amounted to RMB2,062,045,941.00 in total. The
types and structure of shares are as follows:
a. Changes of shareholdings of the Company during the second half of 2009:
Increase/decrease during the period (share)
Lock-up of
Opening balance New issue shareholdings Expiry Share Closing balance
(share ) (Note 1 ) of directors of lock-up reform Others Sub-total (share)
Restricted shares outstanding
State-owned legal
person shares 293,003,657 — — — — — — 293,003,657
Other domestic shares 10,983,469 — 335,192 (186,820 ) — — — 11,131,841
Including: Domestic legal-person
shares — — — — — — — —
Domestic natural
person shares 10,983,469 — 335,192 (186,820 ) — — — 11,131,841
Total number of restricted
shares outstanding 303,987,126 — — — — — — 304,135,498
Listed tradable shares
RMB ordinary shares 809,291,330 — (335,192 ) 186,820 — — — 809,142,958
Domestic listed foreign shares
(B share) 557,497,485 — — — — — — 557,497,485
Overseas listed foreign shares
(H share) 391,270,000 — — — — — — 391,270,000
Total listed tradable shares 1,758,058,815 — — — — — — 1,757,910,443
Total shares 2,062,045,941 — — — — — — 2,062,045,941118
VII. Notes to the financial statements (continued)
34. Share capital (continued)
b. Changes of shareholdings of the Company during 2008:
Increase/decrease during the period (share)
Lock-up of
Opening balance New issue shareholdings Expiry Share Closing balance
(share ) (Note 1 ) of directors of lock-up reform Others Sub-total (share)
Restricted shares outstanding
State-owned legal
person shares 328,573,657 — — — — (35,570,000 ) (35,570,000 ) 293,003,657
Other domestic shares 10,926,796 — 176,774 (120,101 ) — — 56,673 10,983,469
Including: Domestic legal-person
shares — — — — — — —
Domestic natural person shares 10,926,796 — 176,774 (120,101 ) — — 56,673 10,983,469
Total number of restricted
shares outstanding 339,500,453 — 176,774 (120,101 ) — (35,570,000 ) (35,513,327 ) 303,987,126
Listed tradable shares
RMB ordinary shares 809,348,003 — (176,774 ) 120,101 — — (56,673 ) 809,291,330
Domestic listed foreign shares
(B share) 557,497,485 — — — — — — 557,497,485
Overseas listed foreign shares
(H share) — 355,700,000 — — — 35,570,000 391,270,000 391,270,000
Total listed tradable shares 1,366,845,488 355,700,000 (176,774 ) 120,101 — 35,570,000 391,213,327 1,758,058,815
Total shares 1,706,345,941 355,700,000 — — — — 355,700,000 2,062,045,941
Note 1: As approved by the Stock Exchange of Hong Kong Limited, the Company publicly issued 355,700,000 H shares in
June 2008.
Note 2: The shares transferred to the NSSF Council in connection with the reduction of holdings in state-owned shares by the
relevant holders of state-owned shares of the Company were converted into 35,570,000 overseas listed foreign shares
(H shares).
Increase in share capital in connection with the issuance of new shares mentioned above was reviewed by China
Rightson Certified Public Accountants. A capital review report named as Zhong Rui Yue Hua Yan Zi No. [2008]
2189 (中瑞嶽華驗字[2008]第2189號) was published for the certification of the review.119
VII. Unaudited Financial Statements and Notes thereto Prepared in
Accordance with Accounting Standards for Business Enterprises
VII. Notes to the financial statements (continued)
35. Capital reserves
The Group
The reporting period
Increase Decrease
Opening balance for the year for the year Closing balance
RMB RMB RMB RMB
Premium of share capital
Exercise of conversion
rights in convertible
bonds of the Company 2,018,215,301.98 — — 2,018,215,301.98
Capital contribution
from investors 4,110,278,083.64 — — 4,110,278,083.64
Shares issued by way
of capitalization of
capital reserves (737,021,418.15) — — (737,021,418.15)
Other capital reserves
Transfer from capital
reserves under the
original system 463,813,228.85 — — 463,813,228.85
Provision for long-term
equity investments 237,198,605.60 — — 237,198,605.60
Others 1,000,000.00 — — 1,000,000.00
Total 6,093,483,801.92 — — 6,093,483,801.92120
VII. Notes to the financial statements (continued)
35. Capital reserves (continued)
The Group (continued)
2008
Increase Decrease
Opening balance for the year for the year Closing balance
RMB RMB RMB RMB
Premium of share capital
Exercise of conversion
rights in convertible
bonds of the Company 2,018,215,301.98 — — 2,018,215,301.98
Capital contribution
from investors 1,754,786,187.93 2,355,491,895.71 — 4,110,278,083.64
Shares issued by way
of capitalization of
capital reserves (737,021,418.15) — — (737,021,418.15)
Other capital reserves
Transfer from capital
reserves under the
original system 463,813,228.85 — — 463,813,228.85
Provision for long-term
equity investments 237,198,605.60 — — 237,198,605.60
Others 1,000,000.00 — — 1,000,000.00
Total 3,737,991,906.21 2,355,491,895.71 — 6,093,483,801.92
Increase in premium of share capital during the year was due to the increase of capital reserves of the Company by
RMB2,355,491,895.71 through addition of proceeds of H share issuance after deducting issuing fees and share capital.121
VII. Notes to the financial statements (continued)
35. Capital reserves (continued)
The Company
The reporting period
Increase Decrease
Opening balance for the year for the year Closing balance
RMB RMB RMB RMB
Premium of share capital
Exercise of conversion
rights in convertible
bonds of the Company 2,018,215,301.98 — — 2,018,215,301.98
Capital contribution
from investors 4,110,278,083.64 — — 4,110,278,083.64
Shares issued by way
of capitalization of
capital reserves (737,021,418.15) — — (737,021,418.15)
Other capital reserves
Transfer from capital
reserves under the
original system 778,727,767.93 — — 778,727,767.93
Others 14,016,253.37 2,002,595.56 — 16,018,848.93
Total 6,184,215,988.77 2,002,595.56 — 6,186,218,584.33
Other increase during the year in other capital reserves were attributable to loan extended to a subsidiary of the Group
with terms over one year, the interests component of which was included in capital reserves.122
VII. Notes to the financial statements (continued)
35. Capital reserves (continued)
The Company (continued)
2008
Increase Decrease
Opening balance for the year for the year Closing balance
RMB RMB RMB RMB
Premium of share capital
Exercise of conversion
rights in convertible
bonds of the Company 2,018,215,301.98 — — 2,018,215,301.98
Capital contribution
from investors 1,754,786,187.93 2,355,491,895.71 — 4,110,278,083.64
Shares issued by way
of capitalization of
capital reserves (737,021,418.15) — — (737,021,418.15)
Other capital reserves
Transfer from capital
reserves under the
original system 778,727,767.93 — — 778,727,767.93
Others 12,670,520.05 7,797,733.32 (6,452,000.00) 14,016,253.37
Total 3,827,378,359.74 2,363,289,629.03 (6,452,000.00) 6,184,215,988.77
Other reductions during the year in other capital reserves were attributable to the cancellation of subsidiary of the
Company Xiangfan Chenming Copperplate Pater Co., Ltd during 2008; therefore, investments in such entity in prior
years in the form of license rights which caused increase of RMB6,452,000.00 was transferred out of other capital
reserves. Increase during the year was attributable to loan extended to a subsidiary of the Group with terms over one year,
the interests component of which was included in capital reserves.123
VII. Notes to the financial statements (continued)
36. Surplus reserve
The Group
The reporting period
Statuory surplus reserve
RMB
Balance at the beginning of the year 825,476,850.53
Accruals of the year —
Balance at the end of the year 825,476,850.53
2008
Statuory surplus reserve
RMB
Balance at the beginning of the year 723,742,920.58
Accruals of the year 101,733,929.95
Balance at the end of the year 825,476,850.53
The Company
The reporting period
Statuory surplus reserve
RMB
Balance at the beginning of the year 813,287,268.62
Accruals of the year —
Balance at the end of the year 813,287,268.62
2008
Statuory surplus reserve
RMB
Balance at the beginning of the year 711,553,338.67
Accruals of the year 101,733,929.95
Balance at the end of the year 813,287,268.62124
VII. Notes to the financial statements (continued)
37. Undistributed profits
The Group
Report year Previous year
RMB RMB
Undistributed profits at the beginning of the year 3,277,192,810.40 2,576,650,349.38
Add: Net profit of the year 157,487,312.97 1,075,291,741.53
Less: Appropriation of statutory surplus reserves — (101,733,929.95)
Profits available for distribution to shareholders 3,434,680,123.37 3,550,208,160.96
Less: Dividends payable – cash dividends with respect
to last year/prior years approved on the
general shareholders’ meeting (103,102,297.05) (273,015,350.56)
Undistributed profits at the end of the year 3,331,577,826.32 3,277,192,810.40
Including: Cash dividends/profits resolved to be distributed
after the balance sheet date 103,102,297.05
The Company
Report year Previous year
RMB RMB
Undistributed profits at the beginning of the year 2,152,346,247.34 1,509,756,228.39
Add: Net profit of the year 115,350,200.09 1,017,339,299.46
Less: Appropriation of statutory surplus reserves — (101,733,929.95)
Profits available for distribution to shareholders 2,267,696,447.43 2,425,361,597.90
Less: Dividends payable – cash dividends with respect
to last year/prior years approved at the
general shareholders’ meeting(1) (103,102,297.05) (273,015,350.56)
Undistributed profits at the end of the year 2,164,594,150.38 2,152,346,247.34
Including: Cash dividends/profits resolved to be distributed
after the balance sheet date 103,102,297.05
(1) Cash dividends for the year approved at the general shareholders’ meeting
Based on 2,062,045,941 shares of RMB1 each in issued capital of the Company, cash dividends of RMB0.5 for
every 10 shares was distributed to all shareholders in 2008.125
VII. Notes to the financial statements (continued)
38. Minority Interests
Minority interests of the Group’s subsidiaries are as follows:
Closing balance Opening balance
RMB RMB
Jiangxi Chenming Paper Co., Ltd. 826,405,203.88 815,713,717.19
Wuhan Chenming Hanyang Paper Co. Ltd. 553,348,199.48 538,016,783.48
Chibi Chenming Paper Co., Ltd. 160,331,271.16 157,339,051.39
Shandong Chenming Power Supply Holdings. Co., Ltd. 97,182,284.35 107,131,506.95
Yanbian Chenming Paper Co. Ltd. 59,646,150.17 59,855,122.25
Shandong Grand View Hotel Co., Ltd. 15,907,495.30 21,533,161.02
Shouguang Chenming Art Paper Co., Ltd. 36,064,014.28 34,455,133.14
Others 28,949,123.86 28,651,287.55
Total 1,777,833,742.48 1,762,695,762.97
39. Operating Income
The Group
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Principal operations
Including: Machine-made paper 6,373,366,334.34 8,014,572,108.45
Electricity and steam supply 108,739,961.97 125,937,828.75
Building materials 143,529,702.92 315,811,262.25
Papermaking chemicals 3,708,505.15 50,535,484.98
Papermaking equipment 1,163,432.36 3,659,979.80
Hotel income 19,158,559.75 —
Others 333,390.15 16,681,062.50
Other operations
Including: Sales of raw materials and semifinished
products 17,957,104.39 19,596,767.41
Installation engineering and machine
repair workshop 2,430,514.29 849,188.82
Rental income 1,415,339.36 350,075.00
Others 3,563,715.05 4,408,511.44
Total 6,675,366,559.73 8,552,402,269.40126
VII. Notes to the financial statements (continued)
39. Operating Income
The Group
(1) The following table sets forth the breakdown of the income from principal operations of paper products by
geographical segments:
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
PRC 5,648,960,748.12 7,073,977,581.46
United States 53,840,582.65 21,878,867.28
Hong Kong 71,282,360.48 166,607,456.20
Japan 183,108,355.38 64,894,940.18
South Africa 38,699,042.28 151,718,534.73
Other overseas countries 377,475,245.43 535,494,728.60
Total 6,373,366,334.34 8,014,572,108.45
(2) Income from sales to the top 5 customers as a percentage of the total sales income:
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Total income from the top 5 customers 407,472,570.74 496,720,755.86
Percentage 6.10% 5.81%
The Company
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Principal operations
Including: Machine-made paper 5,832,718,789.04 7,085,159,170.83
Electricity and steam supply 100,387,664.41 73,000,537.28
Other operations
Including: Sales of raw materials and
semi-finished products 244,680,143.43 94,219,312.96
Others 3,825,715.89 799,489.17
Total 6,181,612,312.77 7,253,178,510.24127
VII. Notes to the financial statements (continued)
40. Cost of operations
The Group
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Principal operations
Including: Machine-made paper 5,414,319,673.82 6,207,491,180.45
Electricity and steam supply 74,242,679.66 110,185,475.69
Building materials 117,342,306.89 273,559,132.71
Papermaking chemicals 1,858,345.37 20,439,106.15
paper making equipment 792,722.17 2,204,774.61
Hotel costs 5,608,708.61
Others 139,624.53 10,521,827.27
Other operations
Including: Sales of raw materials and semifinished
products 12,129,143.57 18,422,151.89
Installation engineering and machine
repair workshop 1,803,527.53 —
Rental expenses 26,619.79 614.86
Others 991,694.24 4,391,880.28
Total 5,629,255,046.18 6,647,216,143.91
The Company
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Principal operations
Including: Machine-made paper 5,274,722,657.52 6,003,784,187.38
Electricity and steam supply 58,294,423.87 62,618,292.13
Other operations
Including: Sales of raw materials and semifinished
products 243,793,686.15 94,877,062.87
Others 1,803,527.53 7,920.76
Total 5,578,614,295.07 6,161,287,463.14128
VII. Notes to the financial statements (continued)
41. Tax and levies on operations
The Group
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Business tax 3,431,326.28 964,729.69
Urban maintenances and construction tax 2,574,287.06 3,376,866.70
Educational surcharges 1,096,210.51 2,352,706.52
Flood prevention fund 5,023.22 —
Others 2,186.46 61,252.64
Total 7,109,033.53 6,755,555.55
The Company
Accrued during Accrued during
this year the previous year
RMB RMB
Business tax 154,785.75 135,343.88129
VII. Notes to the financial statements (continued)
42. Finance costs
The Group
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Interest expenses 195,044,146.37 244,012,030.75
Less: interest income (27,044,701.31) (8,855,309.87)
Foreign exchange differences (257,433.26) (165,696,861.61)
Handling fee charged by financial institutions 9,105,304.04 9,175,333.11
Total 176,847,315.84 78,635,192.38
The Company
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Interest expenses 165,730,659.72 199,805,699.71
Less: interest income (14,977,732.47) (7,953,456.88)
Foreign exchange differences (76,256.11) (165,293,292.06)
Handling fee charged by financial institutions 4,465,753.19 4,132,740.74
Total 155,142,424.33 30,691,691.51130
VII. Notes to the financial statements (continued)
43. Loss on impairment of assets
The Group
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Provision for bad debts 23,555,474.64 (30,714,668.67)
Provision of allowance for inventory (12,952,416.04) —
Provision for impairment on long-term investments — —
Provision for impairment on fixed assets — —
Total 10,603,058.60 (30,714,668.67)
The Company
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Provision for bad debts 12,791,869.13 (21,862,543.25)
Provision for allowance for inventory — —
Provision for impairment on long-term investments — —
Total 12,791,869.13 (21,862,543.25)131
VII. Notes to the financial statements (continued)
44. Profit and loss on changes in fair values
The Group
Accrued from
Accrued during January to June
this year of 2008
RMB RMB
Biological assets at fair value 1,992,559.76 14,972,240.27
Financial derivatives at fair value 6,993,100.00 1,232,217.00
Total 8,985,659.76 16,204,457.27
The Company
Accrued from
Accrued during January to June
this year of 2008
RMB RMB
Biological assets at fair value — —
Financial derivatives at fair value (5,200,000.00) —
Total (5,200,000.00) —132
VII. Notes to the financial statements (continued)
45. Investment income
The Group
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Gains on long-term equity investments
Including: profits distributed on invested entity
validated using cost method — 85,876.96
Losses recognized using equity method (9,531,720.12) (12,375,340.05)
Total (9,531,720.12) (12,289,463.09)
The Company
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Gains on long-term equity investments
Including: profits distributed on invested entity
validated using cost method — 149,001,020.17
Investment loss from disposal of long-term
equity investments —
Losses recognized using equity method (9,531,720.12) (12,375,340.05)
Gain on entrusted loans 45,939,318.53 94,039,907.47
Total 36,407,598.41 230,665,587.59
There are no significant restrictions on remittance of investment gains back to the Company.133
VII. Notes to the financial statements (continued)
46. Non-operating income
The Group
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Net income on disposal of assets 10,445,396.64 1,577,355.30
Insurance claims 2,179,040.12 7,834,099.22
Income from default penalty and fine 260,528.52 181,840.00
Income from debt reconstructing 248,447.14 25,651.03
Unpaid debts 7,452,764.59 999,953.94
Profit or loss arising from investment costs for
acquisition of minority interests by the corporation
being less than its share of fair value of identifiable
net assets of the invested entity on acquisition — 28,211,118.08
Profit or loss arising from investment costs for
acquisition of a subsidiary by the corporation being less
than its share of fair value of identifiable net assets
of the invested entity on acquisition (Note VII.58) 3,026,165.27 —
Government grants (Note VII. 49) 42,973,571.38 128,992,446.44
Others 1,798,915.63 982,154.69
Total 68,384,829.29 168,804,618.70
The Company
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Net income on disposal of assets 10,028,302.09 —
Income from default penalty and fine — —
Unpaid debts 452,764.40 1,564.34
Government grants (Note VII. 49) 21,250,516.00 80,030,000.00
Others 1,076,802.98 13,872.29
Total 32,808,385.47 80,045,436.63134
VII. Notes to the financial statements (continued)
47. Non-operating expenses
The Group
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Net loss from disposal of assets 4,653,149.89 1,394,490.60
Donation expenses 50,000.00 5,628,666.60
Fine payments 458,420.53 2,210.00
Others 161,061.38 903,799.89
Total 5,322,631.80 7,929,167.09
The Company
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Net loss from disposal of assets 4,449,274.39 739,683.34
Fine payments 217,300.00 4,586,626.60
Donation expenses — —
Others 5.81 617,224.68
Total 4,666,580.20 5,943,534.62
48. Income tax expenses
The Group
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Income tax expenses for current year 56,621,495.64 258,065,984.54
Deferred income tax expenses (4,496,679.33) 8,936,067.01
Total 52,124,816.31 267,002,051.55135
VII. Notes to the financial statements (continued)
48. Income tax expenses (continued)
The Company
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Income tax expenses for current year 46,471,000.83 213,295,838.28
Deferred income tax expenses 3,248,018.27 5,055,619.96
Total 49,719,019.10 218,351,458.24
49. Government grants
The Group
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Reversal of value-added tax (note 1) 7,596,994.38 25,236,318.81
Financial support fund (note 2) 35,376,577.00 103,756,127.63
Total 42,973,571.38 128,992,446.44
Note 1: Reversal of value-added tax was the value-added tax levied on products of the subsidiaries of the Company primarily made
of the three remains and shoddy wood subject to the value-added tax benefit of levy-first-refund-immediately mainly in
accordance with Cai Shui [2006] No 102 promulgated by the State Administration of Taxation in August 2006.
Note 2: Financial support fund was the financial incentive fund and other support fund granted by the local governments to support
the development of the Company and its subsidiaries.
The Company
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Reversal of value-added tax
Financial support fund 21,250,516.00 80,030,000.00
Total 21,250,516.00 80,030,000.00136
VII. Notes to the financial statements (continued)
50. Earnings per share
Net profit for the period attributable to ordinary shareholders for the purpose of calculating earnings per share are as
follows:
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Net profit for the period attributable to
ordinary shareholders 157,487,312.97 947,427,409.04
Net profit for the period attributable to ordinary shareholders for the purpose of calculating diluted earnings per share are
as follows:
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Net profit for the period attributable to
ordinary shareholders 157,487,312.97 947,427,409.04
Interests on dilutive potential ordinary shares for
the period recognized as expenses attributable to
ordinary shareholders after deducting
the effect of income tax N/A N/A
Effect of income tax attributable to ordinary shareholders N/A N/A
Total N/A N/A
For the purpose of calculating earnings per share, the denominator, being the weighted average of outstanding ordinary
shares, is calculated as follows:
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Number of outstanding ordinary shares
at the beginning of the year 2,062,045,941.00 1,706,345,941.00
Add: number of weighted ordinary shares
issued during the period — 23,452,747.25
Less: number of weighted ordinary shares
repurchased during the period — —
Number of outstanding ordinary shares
at the end of the year 2,062,045,941.00 1,729,798,688.25137
VII. Notes to the financial statements (continued)
50. Earnings per share (continued)
For the purpose of calculating diluted earnings per share, the number of outstanding weighted average ordinary shares is
calculated as follows:
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Number of weighted average ordinary shares for
the purpose of calculating basic earnings per share 2,062,045,941.00 1,729,798,688.25
Add: number of weighted average ordinary shares
increased assuming dilutive potential ordinary shares
were converted into issued ordinary shares N/A N/A
Including: number of weighted ordinary shares increased
on conversion of convertible corporate bonds N/A N/A
Number of weighted average ordinary shares for the
purpose of calculating diluted earnings per share N/A N/A
Earnings per share
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Calculated based on net profit attributable to
shareholders of parent company:
Basic earnings per share 0.076 0.55
Diluted earnings per share N/A N/A138
VII. Notes to the financial statements (continued)
51. Net profit after deducting extraordinary gains and losses
Accrued from Accrued from
January to June January to June
of 2009 of 2008
RMB RMB
Net profit 186,114,826.62 1,079,653,729.62
Add: items of extraordinary gains and losses
Gains and losses generated from held for
trading financial instatement (6,993,100.00) —
Reversal of impairment provision on receivables
tested for impairment on individual basis — (12,470,039.30)
Net gains and losses from disposal
of non-current assets (5,792,246.75) (182,864.70)
Government grants accounted for in profit and
loss account of the current period (35,376,577.00) (106,938,176.97)
Net gains and losses from debt restructuring (248,447.14) 591,573.65
Profit or loss arising from investment costs for
acquisition of minority interests by the corporation
being less than its share of fair value of identifiable
net assets of the invested entity on acquisition — (28,211,118.08)
Profit or loss arising from investment costs for
acquisition of a subsidiary by the corporation
being less than its share of fair value of identifiable
net assets of the invested entity on acquisition (3,026,165.27) —
Non-operating net gains and losses other than
the above items (11,021,766.95) (20,285,053.31)
Add: effect of extraordinary gains and losses
on income tax 10,888,548.11 38,506,287.00
Net profit after deducting extraordinary gains and losses 134,545,071.62 950,664,337.91
Including: net profit attributable to shareholders
of parent company 112,230,568.55 823,334,761.83
Net profit attributable to minority interests 22,314,503.07 127,329,576.08139
VII. Notes to the financial statements (continued)
52. Cash and cash equivalents
The Group
30 June 31 December
2009 2008
RMB RMB
Cash 2,487,107,389.80 2,687,579,159.85
Of which: Treasury cash 1,965,293.12 1,341,632.42
Bank deposit withdrawn on demand 2,485,142,096.68 2,686,237,527.43
Balance of cash and cash equivalents 2,487,107,389.80 2,687,579,159.85
The Company
30 June 31 December
2009 2008
RMB RMB
Cash 2,118,667,220.53 2,080,005,634.40
Including: Treasury cash 162,160.92 30,527.86
Bank deposit withdrawn on demand 2,118,505,059.61 2,079,975,106.54
Balance of cash and cash equivalents 2,118,667,220.53 2,080,005,634.40140
VII. Notes to the financial statements (continued)
53. Supplementary information on the cash flow statement
The Group
Accrued during Accrued during
this year the previous year
RMB RMB
Reconciliation of net profit as cash flows
from operating activities
Net profit 186,114,826.62 1,079,653,729.62
Add: provision for impairment of assets 10,603,058.60 (30,714,668.67)
Depreciation of fixed assets 591,218,076.99 547,556,783.11
Depreciation of real estate held for investment 869,128.02 —
Intangible assets amortized 9,897,371.68 11,010,676.63
Amortisation of long-term expenses to be amortized 7,491,557.58 13,985,652.29
Investment income 9,531,720.11 12,289,463.09
Net losses from disposal of fixed assets (5,770,621.15) 1,394,490.60
Finance costs 194,786,713.11 247,610,785.34
Decrease in stock (minus: increase) 394,297,232.45 (904,282,716.55)
Decrease in consumable biological assets
(minus: increase) (99,166,606.14) —
Losses from change in fair value (minus: gains) (8,985,659.76) (16,204,457.27)
Decrease in deferred income tax assets (minus: increase) (4,994,819.27) 5,193,006.94
Increase in deferred income tax debt (minus: decrease) 498,139.94 3,743,060.07
Profit or loss arising from investment costs for
acquisition of minority interests by the corporation
being less than its share of fair value of identifiable
net assets of the invested entity on acquisition — (28,211,118.08)
Profit or loss arising from investment costs for
acquisition of a subsidiary by the corporation
being less than its share of fair value of identifiable
net assets of the invested entity on acquisition (3,026,165.27) —
Negative goodwill arising on acquisition
of minority interests —
Decrease in operating receivables (minus: increase) (1,659,192,379.76) 285,044,458.54
Increase in operating payables (minus: decrease) (150,273,381.23) 482,486,165.64
Net cash flows from operating activities (526,101,807.48) 1,710,555,311.30
Major investments and financing activities not
involving cash settlements
Capital converted from debts — —
Net change in cash and cash equivalents
Cash balance at the end of the year 2,487,107,389.80 3,613,209,716.27
Less: cash balance at the beginning of the year 2,687,579,159.85 613,826,456.62
Net increase in cash and cash equiralents (200,471,770.05) 2,999,383,259.65141
VII. Notes to the financial statements (continued)
53. Supplementary information on the cash flow statement
The Company
Accrued during Accrued during
this year the previous year
RMB RMB
Reconciliation of net profit as cash flows from
operating activities
Net profit 115,350,200.09 869,978,299.16
Add: provision for impairment of assets 12,791,869.13 (21,862,543.25)
Depreciation of fixed assets 319,153,153.24 316,484,502.45
Depreciation of real estate held for investment 869,128.02 —
Intangible assets amortized 4,566,229.68 4,620,777.06
Investment income (36,407,598.14) (230,665,587.59)
Net losses from disposal of fixed assets (5,375,152.20) 739,683.34
Finance costs 165,654,403.61 35,666,705.75
Decrease in stock (minus: increase) 397,317,086.04 (559,335,492.23)
Loss on change in fair value (minus: gain) 5,200,000.00
Decrease in deferred income tax assets (minus: increase) 3,248,018.27 5,055,619.96
Decrease in operating receivables (minus: increase) (2,023,728,576.95) 641,637,828.76
Increase in operating payables (minus: decrease) (13,489,171.55) 491,252,152.77
Net cash flows from operating activities (1,054,850,410.76) 1,553,571,946.18
Major investments and financing activities not
involving cash settlements
Capital converted from debts — —
Net change in cash and cash equivalents
Cash balance at the end of the year 2,118,667,220.53 3,128,752,376.76
Less: cash balance at the beginning of the year 2,080,005,634.40 235,957,551.29
Net increase in cash and cash equiralents 38,661,586.13 2,892,794,825.47142
VII. Notes to the financial statements (continued)
54. Other cash received relating to operating activities
The Group
Jan-Jun 2009 Jan-Jun 2008
RMB RMB
Financial support fund 35,376,577.00 103,756,127.63
Interest income 27,044,701.31 7,941,905.77
Income from default penalty and fine — —
Other income 38,749,283.09 56,315,621.84
Total 101,170,561.40 168,013,655.24
The Company
Jan-Jun 2009 Jan-Jun 2008
RMB RMB
Financial support fund 21,250,516.00 80,030,000.00
Interest income 14,977,732.47 4,065,321.36
Repayments from subsidiaries — —
Income from default penalty and fine — —
Other income 16,179,277.98 192,114.88
Total 52,407,526.45 84,287,436.24
55. Other cash paid relating to operating activities
The Group
Jan-Jun 2009 Jan-Jun 2008
RMB RMB
Traffic expense 247,426,114.31 240,769,650.14
Hospitality expense 4,510,090.70 17,281,215.27
Rental expense 10,487,449.89 1,563,779.26
Travel expense 12,429,321.79 11,775,234.88
Office expense 5,510,093.64 5,800,591.57
Waste disposal expense 11,728,081.88 20,300,747.17
Insurance premium 10,018,968.26 9,967,305.71
Water and electricity expense 7,684,307.74 5,058,022.87
Repair expense 3,180,132.91 5,374,976.47
Advertising expense 454,684.90 —
Intermediary service expense 5,770,384.18 7,820,674.19
Quality compensation 1,443,493.44 2,803,811.33
Others 78,960,285.61 62,102,249.98
Total 399,603,409.25 390,618,258.84143
VII. Notes to the financial statements (continued)
55. Other cash paid relating to operating activities (continued)
The Company
Jan-Jun 2009 Jan-Jun 2008
RMB RMB
Traffic expense 161,349,336.06 139,493,590.05
Hospitality expense 203,484.86 13,506,808.38
Rental expense 2,225,171.64 1,442,013.25
Travel expense 9,654,724.42 8,088,575.22
Office expense 2,920,353.51 2,833,848.07
Waste disposal expense 6,000,000.00 5,757,805.97
Insurance premium 6,073,582.28 6,865,708.19
Water and electricity expense 777,900.49 828,560.52
Repair expense 903,707.30 5,127,855.51
Advertising expense 79,000.00 —
Intermediary service expense 3,107,098.34 6,870,171.49
Quality compensation 78,642.03 2,329,776.54
Payments to subsidiaries 377,216,191.29 (229,691,500.00)
Others 847,912.34 41,384,226.13
Total 571,437,104.56 4,837,439.32
56. Cash received relating to other investment activities
The Group
Jan-Jun 2009 Jan-Jun 2008
RMB RMB
Special subsidy funds received 47,990,000.00 65,922,610.10
The Company
Jan-Jun 2009 Jan-Jun 2008
RMB RMB
Special subsidy funds received 4,850,000.00 42,656,386.46144
VII. Unaudited Financial Statements and Notes thereto Prepared in
Accordance with Accounting Standards for Business Enterprises
VII. Notes to the financial statements (continued)
57. Other cash paid relating to financing activities
The Group
Jan-Jun 2009 Jan-Jun 2008
RMB RMB
Increase in restricted bank deposits during the period 1,340,013,989.64 —
Total 1,340,013,989.64 —
The Company
Jan-Jun 2009 Jan-Jun 2008
RMB RMB
Increase in restricted bank deposits during the period 1,315,594,417.01 —
Total 1,315,594,417.01 —145
VII. Notes to the financial statements (continued)
58. Business combination
The Group as a party in business combination of entities not under common control:
During the reporting period, the overview of business combination of entities not under common control happening to the
Group are set out below:
(1) 壽光虹宜包裝裝飾有限公司
a. Overview of the acquired entity:
During the reporting period, Shouguang Chenming Modern Logistic Co., Ltd., a subsidiary of the Company,
acquired 100% of equity interests in 壽光虹宜包裝裝飾有限公司 for a consideration of RMB1,700,000.00.
The above acquired subsidiary had fair value basically consistent with its carrying amount. The particulars are
as follows:
b. Important financial information about the acquired entity:
Items Carrying amount on the acquisition date
RMB
Identifiable assets
Current assets 15,883,011.87
Non-current assets 3,193,429.18
Sub-total 19,076,441.05
Identifiable liabilities
Current liabilities 17,278,556.09
Sub-total 17,278,556.09
Total net assets 1,797,884.96
Less: Consideration of acquisition 1,700,000.00
Discount on acquisition 97,884.96
Amount
RMB
Cash and cash equivalents used as consideration of merger 1,700,000.00
Less: Cash and cash equivalents held by the merged subsidiary 930,134.89
Cash and cash equivalents received on acquiring the subsidiary (769,865.11)146
VII. Notes to the financial statements (continued)
58. Business combination (continued)
(2) 壽光市新源煤炭有限公司(Shouguang Xinyuan Coal Company Limited)
a. Overview of the acquired entity:
During the reporting period, Shouguang Chenming Modern Logistic Co., Ltd., a subsidiary of the Company,
acquired 50% of equity interests in Shouguang Xinyuan Coal Company Limited for a consideration of
RMB1,200,000.00. 壽光維遠物流有限公司(Shouguang Wei Yuan Logistics Company Limited), a
wholly-owned subsidiary of Shouguang Chenming Modern Logistic Co., Ltd., holds 50% of equity interests in
Shouguang Xinyuan Coal Company Limited. Therefore, Shouguang Chenming Modern Logistic Co., Ltd., a
subsidiary of the Company, holds 100% of equity interests in Shouguang Xinyuan Coal Company Limited in
aggregate.
b. Important financial information about the acquired entity:
Carrying amount
Items on the acquisition date
RMB
Identifiable assets
Current assets 2,274,962.38
Non-current assets 134,965.92
Sub-total 2,409,928.30
Identifiable liabilities
Current liabilities 9,928.30
Sub-total 9,928.30
Total net assets 2,400,000.00
Proportion (50%) attributable to subsidiary of the
Company Shouguang Chenming Modern Logistic Co., Ltd. 1,200,000.00
Less: Consideration of acquisition 1,200,000.00
Premium on acquisition —
Amount
RMB
Cash and cash equivalents used as consideration of merger 1,200,000.00
Less: Cash and cash equivalents held by the merged subsidiary 534,803.82
Cash and cash equivalents received on acquiring the subsidiary (665,196.18)147
VII. Notes to the financial statements (continued)
58. Business combination (continued)
(3) 壽光維遠物流有限公司(Shouguang Wei Yuan Logistics Company Limited)
a. Overview of the acquired entity:
During the reporting period, Shouguang Chenming Modern Logistic Co., Ltd., a subsidiary of the Company,
acquired 100% of equity interests in Shouguang Wei Yuan Logistics Company Limited for a consideration of
RMB4,00,000.00.
b. Important financial information about the acquired entity:
On the acquisition date
Items Carrying amount Fair value
RMB RMB
Identifiable assets
Current assets 3,258,588.83 3,258,588.83
Non-current assets 8,669,524.08 10,415,167.17
Sub-total 11,928,112.91 13,673,756.00
Identifiable liabilities
Current liabilities 6,745,475.69 6,745,475.69
Sub-total 6,745,475.69 6,745,475.69
Total net assets 5,182,637.22 6,928,280.31
Less: Consideration of acquisition 4,000,000.00
Discount on acquisition 2,928,280.31
Amount
RMB
Cash and cash equivalents used as consideration of merger 4,000,000.00
Less: Cash and cash equivalents held by the merged subsidiary 729,299.57
Cash and cash equivalents received on acquiring the subsidiary (3,270,700.43)148
VII. Notes to the financial statements (continued)
59. Segment reporting
Information on related segments of the Group is summarized below.
Segment revenue
Accrued during Accrued during
this year the previous year
RMB RMB
Segment revenue 532,138,715.43 1,683,985,132.70
Among which: Machine-made paper 523,339,301.61 1,637,637,891.90
Building materials (11,454,261.96) 30,534,468.51
Electricity and steam supply 31,403,157.86 7,827,542.38
Others (11,149,482.08) 7,985,229.91
Investment income (9,531,720.12) (12,375,340.05)
Unallocated administrative expenses (98,308,865.77) (97,146,438.00)
Profit and loss on change in fair value 8,985,659.76 16,204,457.27
Finance expense (195,044,146.37) (244,012,030.75)
Profits before tax 238,239,642.93 1,346,655,781.17
Income tax (52,124,816.31) (267,002,051.55)
Net profit 186,114,826.62 1,079,653,729.62149
VIII. Related party relations and transactions
(1) Save for subsidiaries set out in note VI, information on the first major shareholder is set as follows
Name of Place of Principal Relationship Economic Legal
related party incorporation operations with the Company nature or type representative
Shouguang Chenming Shouguang City Investments The first major Limited Chen Hongguo
Holdings Co., Ltd in papermaking, shareholder liability
electricity, coal, company
forestry projects
Shouguang Chenming Holdings Co., Ltd (hereafter referred to as“Shouguang Chenming Holdings”) was established on
30 December 2005 by Shouguang SASAC which contributed its state-owned shares to set up the Company. The China
Securities Regulatory Commission finally approved the change in the holder of state-owned Shares of Chenming Paper
and the change in nature of its equity interests arising from the establishment of Shouguang Chenming Holdings on 14
August 2006 ( Guo Zi Chan Quan [2005] No. 1539) . Since then, the first major shareholder of the Company was changed
from State-owned Assets Supervision and Administration Commission of Shouguang City to Shouguang Chenming
Holdings .
(2) Other related parties which entered into transactions with the Group but without controlling relation
are as follows
Organization code Related party relation
Shouguang Liben Paper Making Co., Ltd. 61358854-8 Associated corporation
Qingzhou Chenming Denaturation Amylum Co., Ltd. 16937769-8 Associated corporation
Arjo Wiggins Chenming Specialty Paper Co., Ltd. 78233868-9 Associated corporation
江西江報傳媒彩印有限公司 79479506-x Associated corporation150
VIII. Related party relations and transactions (continued)
(3) Major connected transactions entered into between the Company and related parties during the year
are as follows
(a) Sales and purchases
Details of sales and purchases of goods to and from related parties by the Company are as follows:
30 June 2009 30 June 2008
Amount Percentage Amount Percentage
RMB % RMB %
Sales – subsidiaries of
the Company 583,027,020.14 99.32 491,700,523.33 95.57
– associated corporations
of the Company 3,994,099.63 0.68 22,798,093.17 4.43
587,021,119.77 100.00 514,498,616.50 100.00
Purchases – subsidiaries
of the Company 2,649,861,106.25 100.00 3,541,829,002.39 100.00
2,649,861,106.25 100.00 3,541,829,002.39 100.00
The Company sells and purchases to and from related parties at prices negotiated between both parties.
(b) Lending and borrowing
Details of lending and borrowing between the Company and related parties are as follows:
Amount incurred
Amount incurred Balance for during the Balance for the
Name of subsidiaries Annual rate during the year this year Percentage previous year previous year Percentage
% RMB RMB % RMB RMB %
Jilin Chenming Paper Co., Ltd. 6.723 — 80,000,000.00 4.53 (1,150,000,000.00 ) 80,000,000.00 4.11
Shandong Chenming Panels Co., Ltd. 5.022 (5,000,000.00 ) 32,000,000.00 1.81 (40,000,000.00 ) 37,000,000.00 1.9
Wuhan Chenming Hanyang Paper Co., Ltd. 4.779 0.00 550,000,000.00 31.14 (30,000,000.00 ) 550,000,000.00 28.25
Wuhan Chenming Qianneng Electric
Power Co., Ltd. 4.779 20,000,000.00 55,000,000.00 3.11 (20,000,000.00 ) 35,000,000.00 1.8
Shandong Chenming Paper Qihe
Paperboard Co., Ltd. — — — — (120,000,000.00 ) — —
Jiangxi Chenming Paper Co., Ltd. 4.86-5.94 95,000,000.00 795,000,000.00 45.01 400,000,000.00 700,000,000.00 35.95
Heze Chenming Panels Co., Ltd. 4.779-6.723 0.00 71,000,000.00 4.02 15,000,000.00 71,000,000.00 3.65
Hailaer Chenming Paper Co., Ltd 5.022 (900,000.00 ) 18,100,000.00 1.03 (10,000,000.00 ) 19,000,000.00 0.98
Qihe Chenming Panels Co., Ltd 5.022 0.00 15,000,000.00 0.85 (7,000,000.00 ) 15,000,000.00 0.77
Juancheng Chenming Panels Co., Ltd. 4.779 0.00 40,000,000.00 2.27 20,000,000.00 40,000,000.00 2.05
Shandong Chenming Grand
View Hotel Co., Ltd. 6.723 0.00 110,000,000.00 6.23 110,000,000.00 110,000,000.00 5.65
Shouguang Chenming Art Paper Co., Ltd. 6.723 (290,000,000.00 ) — 290,000,000.00 290,000,000.00 14.89
Total (180,900,000.00 ) 1,766,100,000.00 100.00 (542,000,000.00 ) 1,947,000,000.00 100.00151
VIII. Related party relations and transactions (continued)
(3) Major connected transactions entered into between the Company and related parties during the year
are as follows (continued)
(c) Balance of credit and debt
Item Closing balance Opening balance
RMB RMB
Accounts receivable – between subsidiaries of the Company 820,392,082.95 525,597,011.45
– between associated corporations
of the Company — 10,744,498.96
Total 820,392,082.95 536,341,510.41
Other receivables – between subsidiaries of the Company 1,220,869,658.46 840,005,604.20
– between associated corporations
of the Company 1,738,181.29 14,678,824.86
Total 1,222,607,839.75 854,684,429.06
Prepayments - between subsidiaries of the Company 236,753,586.21 270,455,992.44
Accounts payable – between subsidiaries of the Company 1,694,317,263.96 826,483,624.07
– between associated corporations
of the Company — —
Total 1,694,317,263.96 826,483,624.07
Other payables – between subsidiaries of the Company 72,977,918.95 109,518,990.30
Dividends receivable – between subsidiaries of the Company 139,874,997.10 164,874,997.10
Bills payable – between subsidiaries of the Company — 3,260,000.00
208,554.60 —
(d) Senior executive’s remuneration
Accrued during Accrued during
this year the previous year
RMB’000 RMB’000
Senior executive’ s remuneration 2,020 4,824
Senior executives include the Company’s Directors, Supervisors, general managers, deputy general managers,
secretary to the Board of Directors and financial officers.152
VIII. Related party relations and transactions (continued)
(3) Major connected transactions entered into between the Company and related parties during the year
are as follows (continued)
(e) Guarantees provided for subsidiaries
As at 31 December 2008, guarantees provided for subsidiaries by the Company to secure lending were as follows:
Name of subsidiaries Amount under guarantee
RMB
Jiangxi Chenming Paper Co., Ltd. 250,000,000.00
Jilin Chenming Paper Co., Ltd. 3,415,950.00
Wuhan Chenming Hanyang Paper Co., Ltd. 40,000,000.00
Zhanjiang Chenming Paper Pulp Co., Ltd. 106,831,900.00
Huanggang Chenming Arboriculture Co., Ltd. 50,000,000.00
Nanchang Chenming Arboriculture Co., Ltd. (Note 1) 20,000,000.00
Total 470,247,850.00
IX. Commitment
(1) Capital commitments
Closing balance Opening balance
RMB RMB
Contracted but not yet recognized in the financial statements
- Commitments in relation to acquisition and construction
of long-term assets 265,497,085.85 291,332,151.32
(2) Operating lease commitments
As at the balance sheet date, the Group entered into irrevocable operating lease contracts with non-group companies as
follows:
Closing balance Opening balance
RMB RMB
Minimum lease payments under irrevocable operating leases
The first year after balance sheet date 25,870,232.17 49,278,297.28
The second year to fifth year after balance sheet date 114,384,808.28 27,355,917.46
The sixth year after balance sheet date and thereafter 1,089,413,914.54 56,189,228.75
Total 1,229,668,954.99 132,823,443.49153
X. Subsequent events
1. On 6 July 2009, Zhanjiang Chenming Paper Pulp Co., Ltd., a wholly-owned subsidiary of the Company, entered into
equipment purchase contract and culture paper project equipment purchase contract with aggregate considerations of
approximately RMB1.49 billion and RMB1.327 billion, respectively.
2. On 6 August 2009, Shouguang Meilun Paper Co. Ltd., a wholly-owned subsidiary of the Company, entered into a
high-end light copperplate paper project equipment purchase contract with aggregate consideration of approximately
RMB2 billion.
3. Pursuant to the relevant requirements of Administrative Measures Regarding Recognition of New Technology
Enterprises （《高新技術企業認定管理辦法》）, Guidance’s on Recognition of New Technology Enterprises （《高
新技術企業認定管理工作指引》） and Implementation Opinions on Administrative Work Regarding Recognition of
New Technology Enterprises in Guangdong Province （《山東省高新技術企業認定管理工作實施意見》）, the
Company was recognized among the first lot of new technology enterprises in 2009. Pursuant to the relevant rules, the
Company shall be subject to enterprise income tax at the rate of 15% for the three years upon recognition as new
technology enterprise (i.e. from 2009 to 2011). The Company is in the progress of applying for preferential tax treatment.
4. Pursuant to the extraordinary general meeting of the Company held on 27 July 2009, a resolution on the construction of a
high-end low weight coated paper project with an annual production capacity of 800,000 tonnes and construction of a a
high-end white coated linerboard project with annual production capacity of 600,000 tonnes in Shouguang City was
passed. The investment amount for these project will be approximately RMB5.2 billion and RMB2.6 billion respectively.
5. Pursuant to the extraordinary general meeting of the Company held on 27 July 2009, a resolution on the construction of
the project of Chenming International Logistics Centre and the ancillary railway special line in Shouguang City was
passed. The investment amount for this project will be approximately RMB2.0 billion.
XI. Approval of the financial statements
These financial statements were approved by the Board of Directors of the Company on 27 August 2009.154
VII. Unaudited Financial Statements and Notes thereto Prepared in
Accordance with Accounting Standards for Business Enterprises
Supplementary Information Provided
By the management for the first half of 2009
1. DIFFERENCES BETWEEN FINANCIAL STATEMENTS PREPARED IN ACCORDANCE
WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AND FINANCIAL
STATEMENTS PREPARED IN ACCORDANCE WITH RELEVANT CHINA
ACCOUNTING STANDARDS
This reconciliation of differences between the financial statements prepared domestically and overseas was prepared by
Shandong Chenming Paper Holdings Limited in accordance with the relevant requirements of the “Compilation Rules for
Information Disclosures by Companies that Offer Securities to the Public (No. 15) - General Requirements for Financial
Reports” (as amended in 2007) issued by the China Securities Regulatory Commission.
The financial statements of the Group for the first half year of 2009 ware prepared in accordance with the PRC Accounting
Standards of Business Enterprises (ASBEs) which set out net profit and net assets of RMB186,114,826.62 and
RMB14,091,287,449.82 respectively. These figures are different from those reported in the financial statements prepared in
accordance with the International Financial Reporting Standards in the following material aspects:
30 June 2009 First half of 2009
Net assets Net profit
RMB RMB
Amount presented per IFRS 13,744,211,428.64 203,844,568.16
Special fund for treasury bond received
and special accounts payable 328,701,962.36 (16,246,283.53)
Capitalization of foreign exchange gains
and losses on project loans 18,374,058.82 (1,483,458.01)
Amount presented per PRC ASBES 14,091,287,449.82 186,114,826.62
The reason of such differences is as follows:
In years prior to 2006, according to the principles of the PRC Accounting Standards of Business Enterprises (ASBEs), special
funds for treasury bond and special accounts payable related to construction of relevant fixed assets received by the Group
were included in capital reserve. However; according to IAS, the Group will account for special funds for treasury bond and
special accounts payable under deferred income to be amortized by installments over the useful lives of fixed assets.
The above differences were all incurred in years prior to 2006. The management believes such differences in accounting
principles will gradually be eliminated in future years.155
2. RETURN ON NET ASSETS AND EARNINGS PER SHARE ON FULLY DiLUTED AND
WEIGHTED AVERAGE BASIS
This calculation of return on net assets and earnings per was prepared by Shandong Chenming Paper Holdings Limited
(hereinafter referred to as the “Company”) in accordance with the relevant requirements of “Compilation Rules for
Information Disclosures by Companies that Offer Securities to the Public (No. 09) – Calculations and disclosures for the return
on net assets and earnings per share” (as amended in 2007) issued by the China Securities Regulatory Commission.
Calculated
in accordance
with the net
Calculated in profit attributable
accordance with to holders of
the net profit ordinary shares
attributable to in the Company,
holders of the after deducting
ordinary shares extraordinary
Profit during the reporting period in the Company gains and losses
Return on net assets
Fully diluted basis 1.28% 0.91%
Weighted average basis 1.28% 0.91%
Earnings per share
Basis earnings per share 0.076 0.054
Diluted earnings per share N/A N/A156
3. ANALYSIS ON CHANGES OF ITEMS IN THE FINANCIAL STATEMENTS
The following analysis on changes of items in the financial statements was prepared by Shandong Chenming Paper Holdings
Limited in accordance with the relevant requirements of the “Compilation Rules for Information Disclosures by Companies
that Offer Securities to the Public (No. 15) – General Requirements for Financial Reports” (as amended in 2007) issued by the
China Securities Regulatory Commission.
As at 30 As at 31 Reasons for
Balance sheet items June 2009 December 2008 Change the change
RMB RMB %
Bank balances and cash 3,992,960,347.64 2,853,418,128.07 39.94 (1)
Financial assets held for trading 12,200,000.00 100.00 (2)
Bills receivable 2,221,866,092.84 974,009,788.24 128.12 (3)
Accounts receivable 1,991,014,261.79 1,752,409,349.17 13.62 (4)
Prepayments 657,794,360.86 462,526,338.87 42.22 (5)
Inventories 2,980,266,373.67 3,397,792,930.38 (12.29 ) (6)
Other current assets 127,832,652.63 151,993,045.95 (15.90 ) (7)
Fixed assets 13,727,636,750.57 14,213,441,758.08 (3.42 ) (8)
Construction in progress 536,675,503.19 431,379,272.50 24.41 (9)
Construction materials 27,683,267.72 42,079,864.21 (34.21 ) (9)
Long-term deferred expenditure 44,014,023.55 37,227,730.36 18.23 (10)
Consumable biological assets 422,695,311.24 301,212,691.14 40.33 (11)
Short-term borrowings 4,898,959,345.72 1,516,945,042.67 222.95 (12)
Financial liabilities held for trading 5,200,000.00 198,900.00 2,514.38 (13)
Bills payable 326,094,292.58 367,627,562.14 (11.30 ) (14)
Accounts payable 2,130,086,449.65 2,642,308,185.90 (19.39 ) (15)
Advance receipts 192,986,623.31 101,693,578.57 89.77 (16)
Tax payables 111,825,380.13 49,965,982.34 123.80 (17)
Dividends payable 103,138,386.36 36,089.31 285,686.53 (18)
Non-current liabilities due within one year 382,381,364.15 1,038,125,240.62 (63.17 ) (19)
Other current liabilities 1,252,519,999.98 1,941,874,444.43 (35.50 ) (20)
Long-term borrowings 4,228,896,509.43 4,019,250,823.86 5.22 (21)
Deferred income 103,076,589.48 56,828,375.23 81.38 (22)157
3. ANALYSIS ON CHANGES OF ITEMS IN THE FINANCIAL STATEMENTS (continued)
As at 30 As at 31 Reasons for
Income statement items June 2009 December 2008 Change the change
RMB RMB %
Operating income 6,675,366,559.73 8,552,402,269.40 (21.95 ) (23)
Operating expenses 5,629,255,046.18 6,647,216,143.91 (15.31 ) (24)
Selling expenses 339,929,245.25 402,926,002.43 (15.63 ) (25)
Administrative expenses 335,899,354.53 265,718,708.42 26.41 (26)
Finance expense 176,847,315.84 78,635,192.38 124.90 (27)
Losses from impairment of assets 10,603,058.60 (30,714,668.67 ) 134.52 (28)
Gains on change in fair value 8,985,659.76 16,204,457.27 (44.55 ) (29)
Investment income (9,531,720.12) (12,289,463.09 ) 22.44 (30)
Non-operating income 68,384,829.29 168,804,618.70 (59.49 ) (31)
Non-operating expenses 5,322,631.80 7,929,167.09 (32.87 ) (32)
Income tax expenses 52,124,816.31 267,002,051.55 (80.48 ) (33)
(1) Bank balances and cash of the Group as at 30 June 2009 increased by 39.94% over 31 December 2008, mainly because
discounted bills of the Group for the six months ended 30 June 2009 led to an increase in bank balances and cash.
(2) Financial assets held for trading increased by RMB12,200,000.00 during the period, due to the effects of future pooling
foreign exchange contracts of Chenming (HK) Limited.
(3) Bills receivable increased by 128.12% during the period, mainly because the Group recorded significantly improved sales
compared with the fourth quarter of 2008, increase in income and increase in unmatured discounted bills.
(4) Accounts receivable increased by 13.62% during the period, mainly because sales income increased compared with the
fourth quarter of 2008 as a result of improved operating environment.
(5) Prepayment increased by 42.22% during the period, primarily due to the increase in amount of prepayments on raw
materials during the period as operating environment improved.
(6) Inventories decreased by 12.29% during the period, mainly because the Company adjusted its sales strategies according
to market conditions and reinforced sales efforts to lower inventory or finished products.
(7) Other current assets decreased by 15.9% during the period, mainly due to increase in advanced payment of income tax
and decrease in deductible value added tax and purchase tax.
(8) Fixed assets decreased by 3.42% during the period, mainly due to capitalisation of projects and purchase of fixed assets
decreased during the reporting period, while the charge on depreciation reduced net amount of fixed assets.158
3. ANALYSIS ON CHANGES OF ITEMS IN THE FINANCIAL STATEMENTS (continued)
(9) Construction in progress increased by 24.41% during the period. The reduction of 34.21% in construction materials was
mainly due to (1) reclassification of the modification of equipment by the Company and Fuyu Chenming Paper Co., Ltd.
to construction in progress; and (2) the effect of project inputs.
(10) Long-term deferred expenditure increased by 18.23% during the period, primarily attributable to increase in lease
payments during the period.
(11) Consumable biological assets increased by 40.33% during the year, mainly due to purchase, growing and fair value
change of forestry by subsidiaries of the Company, i.e. Zhanjiang Chenming Arboriculture Co., Ltd., Yangjiang
Chenming Arboriculture Co., Ltd., Nanchang Chenming Arboriculture Co., Ltd. and Huanggang Chenming
Arboriculture Co., Ltd.
(12) Short-term borrowings increased by 222.95% during the period, due to (1) increase in unmatured discounted bills; and (2)
the Company increased short-term borrowings to repay short-term debentures.
(13) Financial liabilities held for trading increased by 2,514.38% during the period, primarily due to the effects of future
pooling foreign exchange contracts of the Company.
(14) Bills payable decreased by 11.30% during the period, mainly because the Company reduced its issuance of promissory
notes.
(15) Accounts payable decreased by 19.39% during the period, mainly attributable to (1) increase in amounts paid by the
Company for raw materials during the period; and (2) Zhanjiang Chenming, a subsidiary of the Compnay, paid land
premium during the period, reducing accounts payable by RMB120 million.
(16) Advance receipts increased by 89.77% during the period, mainly because the Company received more advanced
payments for goods.
(17) Tax payables increased by 123.8% during the period, mainly due to the increase in income tax and value added tax
payable during the period as a result of an improved economic environment.
(18) Dividends payable increased by RMB103,102,297.05 during the period, primarily due to the dividends for the previous
year declared by the Company in June 2009.
(19) Non-current liabilities due within one year reduced by 63.17% during the period, mainly becaused the Group repaid part
of the borrowings due within one year upon maturity.
(20) Other current liabilities decreased by 35.5% during the period, principally because the Company repaid short-term
debentures of RMB700 million during the period.
(21) Long-term borrowings increased by 5.22% during the period, mainly due to the effects of increase in certain long-term
borrowings by the Company.159
3. ANALYSIS ON CHANGES OF ITEMS IN THE FINANCIAL STATEMENTS (continued)
(22) Deferred income increased by 81.38% during the period, mainly because Zhanjiang Chenming Paper Pulp Co., Ltd., a
subsidiary of the Company, received RMB35 million from Zhanjiang City as grants for the water supply work and
highway network work of its Zhanjiang pulp project.
(23) Operating income decreased by 21.95% during the period, mainly because sales price for the first half of 2009 dropped
compared to the corresponding period of last year due to the repercussion of the financial crisis.
(24) Operating expenses decreased by 15.31% during the period, mainly attributable to lower raw material prices in the first
half year of 2009 compared with that of the corresponding period of last year.
(25) Selling expenses decreased by 15.63% during the period, mainly affected by lower transportation expenses.
(26) Administrative expenses increased by 26.41% during the period, mainly due to loss from production interruption arising
from suspension of panel production lines because of the impact of the financial crisis.
(27) Finance expenses increased by 124.9% during the period, mainly because exchange gains reduced in the first half year of
2009 as compared with the corresponding period of last year, as a result of the effect of changes in exchange rates.
(28) Losses from impairment of assets increased by 134.52% during the period, mainly because the Group had more accounts
receivable at the end of June 2009 compared with the beginning of the year, leading to higher provision for bad debts.
(29) Gains on change in fair value reduced by 44.55% during the period, mainly due to small change in fair value in timber
assets compared with the corresponding period of last year.
(30) Investment losses decreased by 22.44% during the period, primarily due to reduced losses of associated corporations
during the period as compared with the corresponding period of last year.
(31) Non-operating income decreased by 59.49% during the period, primarily attributable to (1) lower amount received in
government grants compared with the corresponding period of last year; and (2) negative goodwill arising from
acquisition of minority interests in the corresponding period of last year.160
3. ANALYSIS ON CHANGES OF ITEMS IN THE FINANCIAL STATEMENTS (continued)
(32) Non-operating expenses reduced by 32.87% during the period as compared with the corresponding period of last year,
mainly due to lower donation expenses for the period compared with the corresponding period of last year.
(33) Income tax expenses decreased by 80.48% over the corresponding period of last year, mainly due to lower realized profit
for the period compared with the corresponding period of last year due to the effects of the abovementioned factors.
(34) The supplementary information provided by the management was signed by the responsible personnel of Shandong
Chenming Paper Holdings Limited as shown below on 27 August 2009:
Head of Corporation:
Chief Financial Officer:
Head of finance section:
27 August 2009161
VIII. Documents Available for Inspection
I. Accounting statements signed and stamped with seal by the legal representative, financial controller and responsible personnel
of the accounting institution;
II. copy of the Interim Report signed by the legal representative;
III. originals of corporate documents publicly disclosed in newspapers designated by CSRC during the reporting period and
original copies of the relevant announcements;
IV. copy of the Interim Report filed with the Stock Exchange of Hong Kong Limited; and
V. other relevant information.
